Correlation Between American Airlines and Naked Wines
Can any of the company-specific risk be diversified away by investing in both American Airlines and Naked Wines 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 Naked Wines 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 Naked Wines plc, you can compare the effects of market volatilities on American Airlines and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Naked Wines.
Diversification Opportunities for American Airlines and Naked Wines
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Naked is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of American Airlines i.e., American Airlines and Naked Wines go up and down completely randomly.
Pair Corralation between American Airlines and Naked Wines
Considering the 90-day investment horizon American Airlines is expected to generate 1.37 times less return on investment than Naked Wines. In addition to that, American Airlines is 1.48 times more volatile than Naked Wines plc. It trades about 0.11 of its total potential returns per unit of risk. Naked Wines plc is currently generating about 0.21 per unit of volatility. If you would invest 252.00 in Naked Wines plc on August 31, 2024 and sell it today you would earn a total of 19.00 from holding Naked Wines plc or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Naked Wines plc
Performance |
| Timeline |
| American Airlines |
| Naked Wines plc |
American Airlines and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Naked Wines
The main advantage of trading using opposite American Airlines and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings |
| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Brown Forman |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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