Correlation Between American Airlines and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both American Airlines and Spotify Technology 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 Spotify Technology 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 Spotify Technology SA, you can compare the effects of market volatilities on American Airlines and Spotify Technology 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Spotify Technology.
Diversification Opportunities for American Airlines and Spotify Technology
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Spotify is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of American Airlines i.e., American Airlines and Spotify Technology go up and down completely randomly.
Pair Corralation between American Airlines and Spotify Technology
Assuming the 90 days trading horizon American Airlines is expected to generate 7.55 times less return on investment than Spotify Technology. In addition to that, American Airlines is 1.02 times more volatile than Spotify Technology SA. It trades about 0.02 of its total potential returns per unit of risk. Spotify Technology SA is currently generating about 0.15 per unit of volatility. If you would invest 15,240 in Spotify Technology SA on November 19, 2024 and sell it today you would earn a total of 75,948 from holding Spotify Technology SA or generate 498.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Spotify Technology SA
Performance |
| Timeline |
| American Airlines |
| Spotify Technology |
American Airlines and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Spotify Technology
The main advantage of trading using opposite American Airlines and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| American Airlines vs. Metalrgica Riosulense SA | American Airlines vs. Vulcan Materials | American Airlines vs. Metalurgica Gerdau SA | American Airlines vs. GP Investments |
| Spotify Technology vs. Charter Communications | Spotify Technology vs. Zoom Video Communications | Spotify Technology vs. Verizon Communications | Spotify Technology vs. British American Tobacco |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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