Correlation Between American Airlines and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both American Airlines and Safety Insurance 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 Safety Insurance 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 Safety Insurance Group, you can compare the effects of market volatilities on American Airlines and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Safety Insurance.
Diversification Opportunities for American Airlines and Safety Insurance
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Safety is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of American Airlines i.e., American Airlines and Safety Insurance go up and down completely randomly.
Pair Corralation between American Airlines and Safety Insurance
Assuming the 90 days horizon American Airlines Group is expected to generate 2.01 times more return on investment than Safety Insurance. However, American Airlines is 2.01 times more volatile than Safety Insurance Group. It trades about -0.04 of its potential returns per unit of risk. Safety Insurance Group is currently generating about -0.3 per unit of risk. If you would invest 1,639 in American Airlines Group on October 28, 2024 and sell it today you would lose (45.00) from holding American Airlines Group or give up 2.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Safety Insurance Group
Performance |
| Timeline |
| American Airlines |
| Safety Insurance |
American Airlines and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Safety Insurance
The main advantage of trading using opposite American Airlines and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Air China Limited | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR |
| Safety Insurance vs. PICC Property and | Safety Insurance vs. Fairfax Financial Holdings | Safety Insurance vs. QBE Insurance Group | Safety Insurance vs. Insurance Australia Group |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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