Correlation Between American Airlines and NEXG11
Can any of the company-specific risk be diversified away by investing in both American Airlines and NEXG11 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 NEXG11 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 NEXG11, you can compare the effects of market volatilities on American Airlines and NEXG11 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 NEXG11. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and NEXG11.
Diversification Opportunities for American Airlines and NEXG11
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and NEXG11 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and NEXG11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXG11 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 NEXG11. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXG11 has no effect on the direction of American Airlines i.e., American Airlines and NEXG11 go up and down completely randomly.
Pair Corralation between American Airlines and NEXG11
Assuming the 90 days trading horizon American Airlines Group is expected to generate 4.11 times more return on investment than NEXG11. However, American Airlines is 4.11 times more volatile than NEXG11. It trades about 0.17 of its potential returns per unit of risk. NEXG11 is currently generating about 0.19 per unit of risk. If you would invest 10,460 in American Airlines Group on October 13, 2024 and sell it today you would earn a total of 705.00 from holding American Airlines Group or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Airlines Group vs. NEXG11
Performance |
| Timeline |
| American Airlines |
| NEXG11 |
American Airlines and NEXG11 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and NEXG11
The main advantage of trading using opposite American Airlines and NEXG11 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, NEXG11 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 NEXG11 will offset losses from the drop in NEXG11's long position.| American Airlines vs. Charter Communications | American Airlines vs. United Airlines Holdings | American Airlines vs. Micron Technology | American Airlines vs. Take Two Interactive Software |
| NEXG11 vs. Taiwan Semiconductor Manufacturing | NEXG11 vs. Apple Inc | NEXG11 vs. Alibaba Group Holding | NEXG11 vs. Banco Santander Chile |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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