Correlation Between American Airlines and Extra Space
Can any of the company-specific risk be diversified away by investing in both American Airlines and Extra Space 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 Extra Space 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 Extra Space Storage, you can compare the effects of market volatilities on American Airlines and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Extra Space.
Diversification Opportunities for American Airlines and Extra Space
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Extra is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of American Airlines i.e., American Airlines and Extra Space go up and down completely randomly.
Pair Corralation between American Airlines and Extra Space
Assuming the 90 days trading horizon American Airlines is expected to generate 1.11 times less return on investment than Extra Space. But when comparing it to its historical volatility, American Airlines Group is 1.33 times less risky than Extra Space. It trades about 0.17 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 23,680 in Extra Space Storage on August 30, 2024 and sell it today you would earn a total of 1,895 from holding Extra Space Storage or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Airlines Group vs. Extra Space Storage
Performance |
| Timeline |
| American Airlines |
| Extra Space Storage |
American Airlines and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Extra Space
The main advantage of trading using opposite American Airlines and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.| American Airlines vs. Fidelity National Information | American Airlines vs. The Home Depot | American Airlines vs. Paycom Software | American Airlines vs. NXP Semiconductors NV |
| Extra Space vs. Mitsubishi UFJ Financial | Extra Space vs. United Rentals | Extra Space vs. Zoom Video Communications | Extra Space vs. Cognizant Technology Solutions |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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