Correlation Between American Airlines and Paramount Global
Can any of the company-specific risk be diversified away by investing in both American Airlines and Paramount Global 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 Paramount Global 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 Paramount Global, you can compare the effects of market volatilities on American Airlines and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Paramount Global.
Diversification Opportunities for American Airlines and Paramount Global
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Paramount is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Paramount Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global has no effect on the direction of American Airlines i.e., American Airlines and Paramount Global go up and down completely randomly.
Pair Corralation between American Airlines and Paramount Global
Assuming the 90 days trading horizon American Airlines Group is expected to generate 0.72 times more return on investment than Paramount Global. However, American Airlines Group is 1.4 times less risky than Paramount Global. It trades about 0.04 of its potential returns per unit of risk. Paramount Global is currently generating about 0.01 per unit of risk. If you would invest 8,403 in American Airlines Group on September 12, 2024 and sell it today you would earn a total of 2,084 from holding American Airlines Group or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.15% |
| Values | Daily Returns |
American Airlines Group vs. Paramount Global
Performance |
| Timeline |
| American Airlines |
| Paramount Global |
American Airlines and Paramount Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Paramount Global
The main advantage of trading using opposite American Airlines and Paramount Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Paramount Global 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 Paramount Global will offset losses from the drop in Paramount Global's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines Co | American Airlines vs. United Airlines Holdings |
| Paramount Global vs. MAHLE Metal Leve | Paramount Global vs. American Airlines Group | Paramount Global vs. United Airlines Holdings | Paramount Global vs. Tyson Foods |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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