Correlation Between American Airlines and Alta Equipment
Can any of the company-specific risk be diversified away by investing in both American Airlines and Alta Equipment 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 Alta Equipment 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 Alta Equipment Group, you can compare the effects of market volatilities on American Airlines and Alta Equipment 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 Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Alta Equipment.
Diversification Opportunities for American Airlines and Alta Equipment
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Alta is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of American Airlines i.e., American Airlines and Alta Equipment go up and down completely randomly.
Pair Corralation between American Airlines and Alta Equipment
Considering the 90-day investment horizon American Airlines is expected to generate 1.05 times less return on investment than Alta Equipment. But when comparing it to its historical volatility, American Airlines Group is 1.81 times less risky than Alta Equipment. It trades about 0.23 of its potential returns per unit of risk. Alta Equipment Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Alta Equipment Group on August 28, 2024 and sell it today you would earn a total of 159.00 from holding Alta Equipment Group or generate 24.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Alta Equipment Group
Performance |
| Timeline |
| American Airlines |
| Alta Equipment Group |
American Airlines and Alta Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Alta Equipment
The main advantage of trading using opposite American Airlines and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Alta Equipment 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 Alta Equipment will offset losses from the drop in Alta Equipment's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| Alta Equipment vs. PROG Holdings | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Mega Matrix Corp | Alta Equipment vs. FTAI Aviation Ltd |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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