Correlation Between American Airlines and ATT
Can any of the company-specific risk be diversified away by investing in both American Airlines and ATT 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 ATT 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 ATT Inc, you can compare the effects of market volatilities on American Airlines and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and ATT.
Diversification Opportunities for American Airlines and ATT
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and ATT is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of American Airlines i.e., American Airlines and ATT go up and down completely randomly.
Pair Corralation between American Airlines and ATT
Assuming the 90 days trading horizon American Airlines is expected to generate 2.09 times less return on investment than ATT. In addition to that, American Airlines is 1.56 times more volatile than ATT Inc. It trades about 0.02 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.06 per unit of volatility. If you would invest 3,028 in ATT Inc on August 25, 2024 and sell it today you would earn a total of 1,473 from holding ATT Inc or generate 48.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.0% |
| Values | Daily Returns |
American Airlines Group vs. ATT Inc
Performance |
| Timeline |
| American Airlines |
| ATT Inc |
American Airlines and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and ATT
The main advantage of trading using opposite American Airlines and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| American Airlines vs. Tyson Foods | American Airlines vs. Apartment Investment and | American Airlines vs. Monster Beverage | American Airlines vs. Zoom Video Communications |
| ATT vs. American Airlines Group | ATT vs. Brpr Corporate Offices | ATT vs. Taiwan Semiconductor Manufacturing | ATT vs. Sumitomo Mitsui Financial |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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