Correlation Between American Airlines and Legacy Education
Can any of the company-specific risk be diversified away by investing in both American Airlines and Legacy Education 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 Legacy Education 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 Legacy Education, you can compare the effects of market volatilities on American Airlines and Legacy Education 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 Legacy Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Legacy Education.
Diversification Opportunities for American Airlines and Legacy Education
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Legacy is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of American Airlines i.e., American Airlines and Legacy Education go up and down completely randomly.
Pair Corralation between American Airlines and Legacy Education
Considering the 90-day investment horizon American Airlines is expected to generate 46.66 times less return on investment than Legacy Education. But when comparing it to its historical volatility, American Airlines Group is 2.06 times less risky than Legacy Education. It trades about 0.01 of its potential returns per unit of risk. Legacy Education is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 402.00 in Legacy Education on August 29, 2024 and sell it today you would earn a total of 384.00 from holding Legacy Education or generate 95.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 21.53% |
| Values | Daily Returns |
American Airlines Group vs. Legacy Education
Performance |
| Timeline |
| American Airlines |
| Legacy Education |
American Airlines and Legacy Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Legacy Education
The main advantage of trading using opposite American Airlines and Legacy Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Legacy Education 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 Legacy Education will offset losses from the drop in Legacy Education's long position.| American Airlines vs. JetBlue Airways Corp | American Airlines vs. SkyWest | American Airlines vs. International Consolidated Airlines | American Airlines vs. Spirit 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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