Correlation Between American Airlines and Illumina
Can any of the company-specific risk be diversified away by investing in both American Airlines and Illumina 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 Illumina 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 Illumina, you can compare the effects of market volatilities on American Airlines and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Illumina.
Diversification Opportunities for American Airlines and Illumina
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Illumina is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of American Airlines i.e., American Airlines and Illumina go up and down completely randomly.
Pair Corralation between American Airlines and Illumina
Assuming the 90 days trading horizon American Airlines Group is expected to generate 1.44 times more return on investment than Illumina. However, American Airlines is 1.44 times more volatile than Illumina. It trades about 0.07 of its potential returns per unit of risk. Illumina is currently generating about 0.07 per unit of risk. If you would invest 6,964 in American Airlines Group on September 14, 2024 and sell it today you would earn a total of 3,496 from holding American Airlines Group or generate 50.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Airlines Group vs. Illumina
Performance |
| Timeline |
| American Airlines |
| Illumina |
American Airlines and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Illumina
The main advantage of trading using opposite American Airlines and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines Co | American Airlines vs. United Airlines Holdings |
| Illumina vs. CTEEP Companhia | Illumina vs. Cosan SA | Illumina vs. Telefnica Brasil SA | Illumina vs. Energisa SA |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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