Correlation Between American Airlines and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both American Airlines and Dairy Farm 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 Dairy Farm 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 Dairy Farm International, you can compare the effects of market volatilities on American Airlines and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Dairy Farm.
Diversification Opportunities for American Airlines and Dairy Farm
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Dairy is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of American Airlines i.e., American Airlines and Dairy Farm go up and down completely randomly.
Pair Corralation between American Airlines and Dairy Farm
Assuming the 90 days horizon American Airlines Group is expected to generate 1.04 times more return on investment than Dairy Farm. However, American Airlines is 1.04 times more volatile than Dairy Farm International. It trades about 0.02 of its potential returns per unit of risk. Dairy Farm International is currently generating about 0.0 per unit of risk. If you would invest 1,516 in American Airlines Group on November 6, 2024 and sell it today you would earn a total of 89.00 from holding American Airlines Group or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Dairy Farm International
Performance |
| Timeline |
| American Airlines |
| Dairy Farm International |
American Airlines and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Dairy Farm
The main advantage of trading using opposite American Airlines and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm's long position.| American Airlines vs. FORTRESS BIOTECHPRFA 25 | American Airlines vs. HELIOS TECHS INC | American Airlines vs. US Physical Therapy | American Airlines vs. Kingdee International Software |
| Dairy Farm vs. Waste Management | Dairy Farm vs. CeoTronics AG | Dairy Farm vs. Lendlease Group | Dairy Farm vs. GRENKELEASING Dusseldorf |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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