Correlation Between American Airlines and British American
Can any of the company-specific risk be diversified away by investing in both American Airlines and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on American Airlines and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and British American.
Diversification Opportunities for American Airlines and British American
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and British is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of American Airlines i.e., American Airlines and British American go up and down completely randomly.
Pair Corralation between American Airlines and British American
Assuming the 90 days trading horizon American Airlines Group is expected to under-perform the British American. In addition to that, American Airlines is 4.59 times more volatile than British American Tobacco. It trades about -0.12 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.2 per unit of volatility. If you would invest 4,606 in British American Tobacco on January 25, 2025 and sell it today you would earn a total of 250.00 from holding British American Tobacco or generate 5.43% 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. British American Tobacco
Performance |
| Timeline |
| American Airlines |
| British American Tobacco |
American Airlines and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and British American
The main advantage of trading using opposite American Airlines and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| American Airlines vs. Tyson Foods | American Airlines vs. Apartment Investment and | American Airlines vs. Microchip Technology Incorporated | American Airlines vs. Host Hotels Resorts, |
| British American vs. Altria Group | British American vs. Itasa Investimentos | British American vs. Chunghwa Telecom Co, | British American vs. Cruzeiro do Sul |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |