Correlation Between American Airlines and Vera Bradley
Can any of the company-specific risk be diversified away by investing in both American Airlines and Vera Bradley 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 Vera Bradley 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 Vera Bradley, you can compare the effects of market volatilities on American Airlines and Vera Bradley 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 Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Vera Bradley.
Diversification Opportunities for American Airlines and Vera Bradley
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Vera is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of American Airlines i.e., American Airlines and Vera Bradley go up and down completely randomly.
Pair Corralation between American Airlines and Vera Bradley
Considering the 90-day investment horizon American Airlines Group is expected to generate 0.97 times more return on investment than Vera Bradley. However, American Airlines Group is 1.03 times less risky than Vera Bradley. It trades about 0.02 of its potential returns per unit of risk. Vera Bradley is currently generating about -0.02 per unit of risk. If you would invest 1,372 in American Airlines Group on September 4, 2024 and sell it today you would earn a total of 89.00 from holding American Airlines Group or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Vera Bradley
Performance |
| Timeline |
| American Airlines |
| Vera Bradley |
American Airlines and Vera Bradley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Vera Bradley
The main advantage of trading using opposite American Airlines and Vera Bradley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Vera Bradley 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 Vera Bradley will offset losses from the drop in Vera Bradley'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 |
| Vera Bradley vs. Rocky Brands | Vera Bradley vs. Steven Madden | Vera Bradley vs. Wolverine World Wide | Vera Bradley vs. Caleres |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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