Correlation Between American Airlines and RYANAIR HLDGS
Can any of the company-specific risk be diversified away by investing in both American Airlines and RYANAIR HLDGS 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 RYANAIR HLDGS 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 RYANAIR HLDGS ADR, you can compare the effects of market volatilities on American Airlines and RYANAIR HLDGS 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 RYANAIR HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and RYANAIR HLDGS.
Diversification Opportunities for American Airlines and RYANAIR HLDGS
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and RYANAIR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and RYANAIR HLDGS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RYANAIR HLDGS ADR 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 RYANAIR HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RYANAIR HLDGS ADR has no effect on the direction of American Airlines i.e., American Airlines and RYANAIR HLDGS go up and down completely randomly.
Pair Corralation between American Airlines and RYANAIR HLDGS
Assuming the 90 days horizon American Airlines Group is expected to generate 2.27 times more return on investment than RYANAIR HLDGS. However, American Airlines is 2.27 times more volatile than RYANAIR HLDGS ADR. It trades about 0.19 of its potential returns per unit of risk. RYANAIR HLDGS ADR is currently generating about -0.05 per unit of risk. If you would invest 1,257 in American Airlines Group on August 29, 2024 and sell it today you would earn a total of 154.00 from holding American Airlines Group or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Airlines Group vs. RYANAIR HLDGS ADR
Performance |
| Timeline |
| American Airlines |
| RYANAIR HLDGS ADR |
American Airlines and RYANAIR HLDGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and RYANAIR HLDGS
The main advantage of trading using opposite American Airlines and RYANAIR HLDGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, RYANAIR HLDGS 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 RYANAIR HLDGS will offset losses from the drop in RYANAIR HLDGS's long position.| American Airlines vs. Southwest Airlines Co | American Airlines vs. Ryanair Holdings plc | American Airlines vs. Superior Plus Corp | American Airlines vs. NMI Holdings |
| RYANAIR HLDGS vs. Southwest Airlines Co | RYANAIR HLDGS vs. Ryanair Holdings plc | RYANAIR HLDGS vs. Superior Plus Corp | RYANAIR HLDGS vs. NMI Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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