Correlation Between American Airlines and Liberty International
Can any of the company-specific risk be diversified away by investing in both American Airlines and Liberty International 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 Liberty International 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 Liberty International Holding, you can compare the effects of market volatilities on American Airlines and Liberty International 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 Liberty International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Liberty International.
Diversification Opportunities for American Airlines and Liberty International
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Liberty is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Liberty International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty International 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 Liberty International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty International has no effect on the direction of American Airlines i.e., American Airlines and Liberty International go up and down completely randomly.
Pair Corralation between American Airlines and Liberty International
Considering the 90-day investment horizon American Airlines Group is expected to under-perform the Liberty International. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 12.64 times less risky than Liberty International. The stock trades about -0.03 of its potential returns per unit of risk. The Liberty International Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Liberty International Holding on October 31, 2024 and sell it today you would earn a total of 0.00 from holding Liberty International Holding or generate 0.0% 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. Liberty International Holding
Performance |
| Timeline |
| American Airlines |
| Liberty International |
American Airlines and Liberty International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Liberty International
The main advantage of trading using opposite American Airlines and Liberty International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Liberty International 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 Liberty International will offset losses from the drop in Liberty International's long position.| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines vs. Frontier Group Holdings |
| Liberty International vs. BOS Better Online | Liberty International vs. HF Sinclair Corp | Liberty International vs. 51Talk Online Education | Liberty International vs. Deluxe |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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