Correlation Between American Airlines and Montauk Renewables
Can any of the company-specific risk be diversified away by investing in both American Airlines and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables, you can compare the effects of market volatilities on American Airlines and Montauk Renewables 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 Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Montauk Renewables.
Diversification Opportunities for American Airlines and Montauk Renewables
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Montauk is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of American Airlines i.e., American Airlines and Montauk Renewables go up and down completely randomly.
Pair Corralation between American Airlines and Montauk Renewables
Considering the 90-day investment horizon American Airlines Group is expected to generate 0.56 times more return on investment than Montauk Renewables. However, American Airlines Group is 1.78 times less risky than Montauk Renewables. It trades about 0.0 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.02 per unit of risk. If you would invest 1,666 in American Airlines Group on September 1, 2024 and sell it today you would lose (214.00) from holding American Airlines Group or give up 12.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Montauk Renewables
Performance |
| Timeline |
| American Airlines |
| Montauk Renewables |
American Airlines and Montauk Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Montauk Renewables
The main advantage of trading using opposite American Airlines and Montauk Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Montauk Renewables 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 Montauk Renewables will offset losses from the drop in Montauk Renewables' long position.| American Airlines vs. Canadian Pacific Railway | American Airlines vs. Volaris | American Airlines vs. Werner Enterprises | American Airlines vs. Canadian National Railway |
| Montauk Renewables vs. Avista | Montauk Renewables vs. Allete Inc | Montauk Renewables vs. Black Hills | Montauk Renewables vs. Companhia Paranaense de |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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