Correlation Between American Airlines and Leidos Holdings
Can any of the company-specific risk be diversified away by investing in both American Airlines and Leidos Holdings 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 Leidos Holdings 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 Leidos Holdings, you can compare the effects of market volatilities on American Airlines and Leidos Holdings 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 Leidos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Leidos Holdings.
Diversification Opportunities for American Airlines and Leidos Holdings
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Leidos is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings 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 Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of American Airlines i.e., American Airlines and Leidos Holdings go up and down completely randomly.
Pair Corralation between American Airlines and Leidos Holdings
Assuming the 90 days trading horizon American Airlines Group is expected to generate 0.79 times more return on investment than Leidos Holdings. However, American Airlines Group is 1.27 times less risky than Leidos Holdings. It trades about 0.36 of its potential returns per unit of risk. Leidos Holdings is currently generating about 0.12 per unit of risk. If you would invest 6,592 in American Airlines Group on September 12, 2024 and sell it today you would earn a total of 3,895 from holding American Airlines Group or generate 59.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
American Airlines Group vs. Leidos Holdings
Performance |
| Timeline |
| American Airlines |
| Leidos Holdings |
American Airlines and Leidos Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Leidos Holdings
The main advantage of trading using opposite American Airlines and Leidos Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Leidos Holdings 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 Leidos Holdings will offset losses from the drop in Leidos Holdings' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines Co | American Airlines vs. United Airlines Holdings |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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