Correlation Between American Airlines and Hemisphere Energy
Can any of the company-specific risk be diversified away by investing in both American Airlines and Hemisphere Energy 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 Hemisphere Energy 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 Hemisphere Energy Corp, you can compare the effects of market volatilities on American Airlines and Hemisphere Energy 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 Hemisphere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Hemisphere Energy.
Diversification Opportunities for American Airlines and Hemisphere Energy
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Hemisphere is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Hemisphere Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy Corp 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy Corp has no effect on the direction of American Airlines i.e., American Airlines and Hemisphere Energy go up and down completely randomly.
Pair Corralation between American Airlines and Hemisphere Energy
Assuming the 90 days horizon American Airlines Group is expected to generate 2.03 times more return on investment than Hemisphere Energy. However, American Airlines is 2.03 times more volatile than Hemisphere Energy Corp. It trades about 0.16 of its potential returns per unit of risk. Hemisphere Energy Corp is currently generating about 0.06 per unit of risk. If you would invest 1,225 in American Airlines Group on September 5, 2024 and sell it today you would earn a total of 133.00 from holding American Airlines Group or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Airlines Group vs. Hemisphere Energy Corp
Performance |
| Timeline |
| American Airlines |
| Hemisphere Energy Corp |
American Airlines and Hemisphere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Hemisphere Energy
The main advantage of trading using opposite American Airlines and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Hemisphere Energy 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 Hemisphere Energy will offset losses from the drop in Hemisphere Energy's long position.| American Airlines vs. Hemisphere Energy Corp | American Airlines vs. United Internet AG | American Airlines vs. Computer And Technologies | American Airlines vs. Charter Communications |
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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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