Correlation Between American Airlines and BANK OCHINA
Can any of the company-specific risk be diversified away by investing in both American Airlines and BANK OCHINA 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 BANK OCHINA 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 BANK OCHINA H, you can compare the effects of market volatilities on American Airlines and BANK OCHINA 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 BANK OCHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and BANK OCHINA.
Diversification Opportunities for American Airlines and BANK OCHINA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and BANK is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and BANK OCHINA H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OCHINA H 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 BANK OCHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OCHINA H has no effect on the direction of American Airlines i.e., American Airlines and BANK OCHINA go up and down completely randomly.
Pair Corralation between American Airlines and BANK OCHINA
Assuming the 90 days horizon American Airlines is expected to generate 4.4 times less return on investment than BANK OCHINA. In addition to that, American Airlines is 1.03 times more volatile than BANK OCHINA H. It trades about 0.01 of its total potential returns per unit of risk. BANK OCHINA H is currently generating about 0.05 per unit of volatility. If you would invest 752.00 in BANK OCHINA H on August 31, 2024 and sell it today you would earn a total of 318.00 from holding BANK OCHINA H or generate 42.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
American Airlines Group vs. BANK OCHINA H
Performance |
| Timeline |
| American Airlines |
| BANK OCHINA H |
American Airlines and BANK OCHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and BANK OCHINA
The main advantage of trading using opposite American Airlines and BANK OCHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, BANK OCHINA 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 BANK OCHINA will offset losses from the drop in BANK OCHINA's long position.| American Airlines vs. Southwest Airlines Co | American Airlines vs. Superior Plus Corp | American Airlines vs. NMI Holdings | American Airlines vs. Origin Agritech |
| BANK OCHINA vs. American Airlines Group | BANK OCHINA vs. FIREWEED METALS P | BANK OCHINA vs. Darden Restaurants | BANK OCHINA vs. Perseus Mining Limited |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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