Correlation Between American Airlines and Franklin Wireless
Can any of the company-specific risk be diversified away by investing in both American Airlines and Franklin Wireless 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 Franklin Wireless 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 Franklin Wireless Corp, you can compare the effects of market volatilities on American Airlines and Franklin Wireless 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 Franklin Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Franklin Wireless.
Diversification Opportunities for American Airlines and Franklin Wireless
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Franklin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of American Airlines i.e., American Airlines and Franklin Wireless go up and down completely randomly.
Pair Corralation between American Airlines and Franklin Wireless
Considering the 90-day investment horizon American Airlines Group is expected to generate 1.05 times more return on investment than Franklin Wireless. However, American Airlines is 1.05 times more volatile than Franklin Wireless Corp. It trades about 0.24 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.06 per unit of risk. If you would invest 1,039 in American Airlines Group on August 29, 2024 and sell it today you would earn a total of 425.00 from holding American Airlines Group or generate 40.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Franklin Wireless Corp
Performance |
| Timeline |
| American Airlines |
| Franklin Wireless Corp |
American Airlines and Franklin Wireless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Franklin Wireless
The main advantage of trading using opposite American Airlines and Franklin Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Franklin Wireless 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 Franklin Wireless will offset losses from the drop in Franklin Wireless' long position.| American Airlines vs. JetBlue Airways Corp | American Airlines vs. Allegiant Travel | American Airlines vs. SkyWest | American Airlines vs. International Consolidated Airlines |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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