Correlation Between American Airlines and Tesco PLC
Can any of the company-specific risk be diversified away by investing in both American Airlines and Tesco PLC 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 Tesco PLC 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 Tesco PLC, you can compare the effects of market volatilities on American Airlines and Tesco PLC 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 Tesco PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Tesco PLC.
Diversification Opportunities for American Airlines and Tesco PLC
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Tesco is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco 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 Tesco PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesco PLC has no effect on the direction of American Airlines i.e., American Airlines and Tesco PLC go up and down completely randomly.
Pair Corralation between American Airlines and Tesco PLC
Considering the 90-day investment horizon American Airlines Group is expected to generate 1.83 times more return on investment than Tesco PLC. However, American Airlines is 1.83 times more volatile than Tesco PLC. It trades about 0.11 of its potential returns per unit of risk. Tesco PLC is currently generating about 0.01 per unit of risk. If you would invest 1,394 in American Airlines Group on August 31, 2024 and sell it today you would earn a total of 70.00 from holding American Airlines Group or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Tesco PLC
Performance |
| Timeline |
| American Airlines |
| Tesco PLC |
American Airlines and Tesco PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Tesco PLC
The main advantage of trading using opposite American Airlines and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Tesco PLC 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 Tesco PLC will offset losses from the drop in Tesco PLC's 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 |
| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Dairy Farm International | Tesco PLC vs. Woolworths Group Limited | Tesco PLC vs. Kesko Oyj ADR |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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