Correlation Between American Airlines and APA
Can any of the company-specific risk be diversified away by investing in both American Airlines and APA 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 APA 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 APA Group, you can compare the effects of market volatilities on American Airlines and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and APA.
Diversification Opportunities for American Airlines and APA
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and APA is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and APA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Group has no effect on the direction of American Airlines i.e., American Airlines and APA go up and down completely randomly.
Pair Corralation between American Airlines and APA
Considering the 90-day investment horizon American Airlines Group is expected to generate 0.65 times more return on investment than APA. However, American Airlines Group is 1.53 times less risky than APA. It trades about -0.01 of its potential returns per unit of risk. APA Group is currently generating about -0.02 per unit of risk. If you would invest 1,832 in American Airlines Group on August 28, 2024 and sell it today you would lose (340.00) from holding American Airlines Group or give up 18.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.53% |
| Values | Daily Returns |
American Airlines Group vs. APA Group
Performance |
| Timeline |
| American Airlines |
| APA Group |
American Airlines and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and APA
The main advantage of trading using opposite American Airlines and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, APA 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 APA will offset losses from the drop in APA'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 |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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