Correlation Between American Airlines and CVS Health
Can any of the company-specific risk be diversified away by investing in both American Airlines and CVS Health at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Airlines and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and CVS Health, you can compare the effects of market volatilities on American Airlines and CVS Health and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Airlines with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and CVS Health.
Diversification Opportunities for American Airlines and CVS Health
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and CVS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and American Airlines is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Airlines Group are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of American Airlines i.e., American Airlines and CVS Health go up and down completely randomly.
Pair Corralation between American Airlines and CVS Health
Assuming the 90 days horizon American Airlines Group is expected to generate 1.78 times more return on investment than CVS Health. However, American Airlines is 1.78 times more volatile than CVS Health. It trades about 0.2 of its potential returns per unit of risk. CVS Health is currently generating about -0.4 per unit of risk. If you would invest 1,359 in American Airlines Group on September 22, 2024 and sell it today you would earn a total of 271.00 from holding American Airlines Group or generate 19.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. CVS Health
Performance |
| Timeline |
| American Airlines |
| CVS Health |
American Airlines and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and CVS Health
The main advantage of trading using opposite American Airlines and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, CVS Health can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CVS Health will offset losses from the drop in CVS Health's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Air China Limited | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR |
| CVS Health vs. Gol Intelligent Airlines | CVS Health vs. BlueScope Steel Limited | CVS Health vs. RELIANCE STEEL AL | CVS Health vs. American Airlines Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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