Correlation Between American Airlines and Wolters Kluwer
Can any of the company-specific risk be diversified away by investing in both American Airlines and Wolters Kluwer 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 Wolters Kluwer 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 Wolters Kluwer NV, you can compare the effects of market volatilities on American Airlines and Wolters Kluwer 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 Wolters Kluwer. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Wolters Kluwer.
Diversification Opportunities for American Airlines and Wolters Kluwer
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Wolters is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Wolters Kluwer NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolters Kluwer NV 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 Wolters Kluwer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolters Kluwer NV has no effect on the direction of American Airlines i.e., American Airlines and Wolters Kluwer go up and down completely randomly.
Pair Corralation between American Airlines and Wolters Kluwer
Assuming the 90 days horizon American Airlines is expected to generate 3.05 times less return on investment than Wolters Kluwer. In addition to that, American Airlines is 2.13 times more volatile than Wolters Kluwer NV. It trades about 0.01 of its total potential returns per unit of risk. Wolters Kluwer NV is currently generating about 0.1 per unit of volatility. If you would invest 9,864 in Wolters Kluwer NV on October 28, 2024 and sell it today you would earn a total of 7,036 from holding Wolters Kluwer NV or generate 71.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Wolters Kluwer NV
Performance |
| Timeline |
| American Airlines |
| Wolters Kluwer NV |
American Airlines and Wolters Kluwer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Wolters Kluwer
The main advantage of trading using opposite American Airlines and Wolters Kluwer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Wolters Kluwer 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 Wolters Kluwer will offset losses from the drop in Wolters Kluwer'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 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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