Correlation Between American Airlines and Saia
Can any of the company-specific risk be diversified away by investing in both American Airlines and Saia 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 Saia 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 Saia Inc, you can compare the effects of market volatilities on American Airlines and Saia 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 Saia. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Saia.
Diversification Opportunities for American Airlines and Saia
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Saia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Saia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saia Inc 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 Saia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saia Inc has no effect on the direction of American Airlines i.e., American Airlines and Saia go up and down completely randomly.
Pair Corralation between American Airlines and Saia
Considering the 90-day investment horizon American Airlines is expected to generate 2.01 times less return on investment than Saia. But when comparing it to its historical volatility, American Airlines Group is 1.25 times less risky than Saia. It trades about 0.04 of its potential returns per unit of risk. Saia Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 39,039 in Saia Inc on August 26, 2024 and sell it today you would earn a total of 15,130 from holding Saia Inc or generate 38.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Saia Inc
Performance |
| Timeline |
| American Airlines |
| Saia Inc |
American Airlines and Saia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Saia
The main advantage of trading using opposite American Airlines and Saia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Saia 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 Saia will offset losses from the drop in Saia's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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