Correlation Between American Airlines and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both American Airlines and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on American Airlines and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Fast Retailing.
Diversification Opportunities for American Airlines and Fast Retailing
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Fast is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of American Airlines i.e., American Airlines and Fast Retailing go up and down completely randomly.
Pair Corralation between American Airlines and Fast Retailing
Assuming the 90 days horizon American Airlines is expected to generate 2.46 times less return on investment than Fast Retailing. In addition to that, American Airlines is 1.45 times more volatile than Fast Retailing Co. It trades about 0.02 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.06 per unit of volatility. If you would invest 19,667 in Fast Retailing Co on September 4, 2024 and sell it today you would earn a total of 11,883 from holding Fast Retailing Co or generate 60.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Fast Retailing Co
Performance |
| Timeline |
| American Airlines |
| Fast Retailing |
American Airlines and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Fast Retailing
The main advantage of trading using opposite American Airlines and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR | American Airlines vs. Southwest Airlines Co |
| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |