Correlation Between American Airlines and InterContinental
Can any of the company-specific risk be diversified away by investing in both American Airlines and InterContinental 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 InterContinental 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 InterContinental Hotels Group, you can compare the effects of market volatilities on American Airlines and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and InterContinental.
Diversification Opportunities for American Airlines and InterContinental
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and InterContinental is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of American Airlines i.e., American Airlines and InterContinental go up and down completely randomly.
Pair Corralation between American Airlines and InterContinental
Assuming the 90 days horizon American Airlines Group is expected to under-perform the InterContinental. In addition to that, American Airlines is 2.24 times more volatile than InterContinental Hotels Group. It trades about 0.0 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.19 per unit of volatility. If you would invest 12,100 in InterContinental Hotels Group on November 1, 2024 and sell it today you would earn a total of 600.00 from holding InterContinental Hotels Group or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. InterContinental Hotels Group
Performance |
| Timeline |
| American Airlines |
| InterContinental Hotels |
American Airlines and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and InterContinental
The main advantage of trading using opposite American Airlines and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| American Airlines vs. EBRO FOODS | American Airlines vs. GWILLI FOOD | American Airlines vs. United Natural Foods | American Airlines vs. MAGNUM MINING EXP |
| InterContinental vs. American Airlines Group | InterContinental vs. Gol Intelligent Airlines | InterContinental vs. BlueScope Steel Limited | InterContinental vs. Urban Outfitters |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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