Correlation Between Arm Holdings and American Airlines
Can any of the company-specific risk be diversified away by investing in both Arm Holdings and American Airlines 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 Arm Holdings and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and American Airlines Group, you can compare the effects of market volatilities on Arm Holdings and American Airlines 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 Arm Holdings with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and American Airlines.
Diversification Opportunities for Arm Holdings and American Airlines
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arm and American is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Arm Holdings 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 Arm Holdings plc are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Arm Holdings i.e., Arm Holdings and American Airlines go up and down completely randomly.
Pair Corralation between Arm Holdings and American Airlines
Considering the 90-day investment horizon Arm Holdings plc is expected to generate 2.42 times more return on investment than American Airlines. However, Arm Holdings is 2.42 times more volatile than American Airlines Group. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.3 per unit of risk. If you would invest 15,520 in Arm Holdings plc on November 22, 2024 and sell it today you would lose (84.00) from holding Arm Holdings plc or give up 0.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arm Holdings plc vs. American Airlines Group
Performance |
| Timeline |
| Arm Holdings plc |
| American Airlines |
Arm Holdings and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arm Holdings and American Airlines
The main advantage of trading using opposite Arm Holdings and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Arm Holdings vs. FS KKR Capital | Arm Holdings vs. Ameriprise Financial | Arm Holdings vs. BlackRock | Arm Holdings vs. GMO Internet |
| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Frontier Group Holdings |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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