Correlation Between American Airlines and Volkswagen
Can any of the company-specific risk be diversified away by investing in both American Airlines and Volkswagen 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 Volkswagen 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 Volkswagen AG, you can compare the effects of market volatilities on American Airlines and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Volkswagen.
Diversification Opportunities for American Airlines and Volkswagen
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Volkswagen is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of American Airlines i.e., American Airlines and Volkswagen go up and down completely randomly.
Pair Corralation between American Airlines and Volkswagen
Assuming the 90 days horizon American Airlines Group is expected to generate 3.0 times more return on investment than Volkswagen. However, American Airlines is 3.0 times more volatile than Volkswagen AG. It trades about 0.26 of its potential returns per unit of risk. Volkswagen AG is currently generating about 0.0 per unit of risk. If you would invest 1,290 in American Airlines Group on September 12, 2024 and sell it today you would earn a total of 344.00 from holding American Airlines Group or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Volkswagen AG
Performance |
| Timeline |
| American Airlines |
| Volkswagen AG |
American Airlines and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Volkswagen
The main advantage of trading using opposite American Airlines and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| American Airlines vs. Renesas Electronics | American Airlines vs. UMC Electronics Co | American Airlines vs. CARSALESCOM | American Airlines vs. STMICROELECTRONICS |
| Volkswagen vs. Luckin Coffee | Volkswagen vs. BJs Restaurants | Volkswagen vs. Warner Music Group | Volkswagen vs. Park Hotels Resorts |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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