Correlation Between American Airlines and Hannover Rück
Can any of the company-specific risk be diversified away by investing in both American Airlines and Hannover Rück 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 Hannover Rück 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 Hannover Rck SE, you can compare the effects of market volatilities on American Airlines and Hannover Rück 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 Hannover Rück. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Hannover Rück.
Diversification Opportunities for American Airlines and Hannover Rück
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Hannover is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE 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 Hannover Rück. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of American Airlines i.e., American Airlines and Hannover Rück go up and down completely randomly.
Pair Corralation between American Airlines and Hannover Rück
Assuming the 90 days horizon American Airlines is expected to generate 1.5 times less return on investment than Hannover Rück. In addition to that, American Airlines is 1.97 times more volatile than Hannover Rck SE. It trades about 0.02 of its total potential returns per unit of risk. Hannover Rck SE is currently generating about 0.05 per unit of volatility. If you would invest 18,304 in Hannover Rck SE on September 3, 2024 and sell it today you would earn a total of 6,426 from holding Hannover Rck SE or generate 35.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Hannover Rck SE
Performance |
| Timeline |
| American Airlines |
| Hannover Rck SE |
American Airlines and Hannover Rück Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Hannover Rück
The main advantage of trading using opposite American Airlines and Hannover Rück positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Hannover Rück 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 Hannover Rück will offset losses from the drop in Hannover Rück'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 |
| Hannover Rück vs. Selective Insurance Group | Hannover Rück vs. American Airlines Group | Hannover Rück vs. AEGEAN AIRLINES | Hannover Rück vs. Nok Airlines PCL |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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