Correlation Between American Airlines and Best Buy
Can any of the company-specific risk be diversified away by investing in both American Airlines and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on American Airlines and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Best Buy.
Diversification Opportunities for American Airlines and Best Buy
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Best is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of American Airlines i.e., American Airlines and Best Buy go up and down completely randomly.
Pair Corralation between American Airlines and Best Buy
Assuming the 90 days trading horizon American Airlines Group is expected to generate 1.93 times more return on investment than Best Buy. However, American Airlines is 1.93 times more volatile than Best Buy Co. It trades about 0.24 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.02 per unit of risk. If you would invest 6,026 in American Airlines Group on September 2, 2024 and sell it today you would earn a total of 2,712 from holding American Airlines Group or generate 45.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.88% |
| Values | Daily Returns |
American Airlines Group vs. Best Buy Co
Performance |
| Timeline |
| American Airlines |
| Best Buy |
American Airlines and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Best Buy
The main advantage of trading using opposite American Airlines and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| American Airlines vs. GP Investments | American Airlines vs. Verizon Communications | American Airlines vs. Brpr Corporate Offices | American Airlines vs. Warner Music Group |
| Best Buy vs. Take Two Interactive Software | Best Buy vs. Cognizant Technology Solutions | Best Buy vs. Livetech da Bahia | Best Buy vs. Brpr Corporate Offices |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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