Correlation Between Atlas Corp and American Airlines
Can any of the company-specific risk be diversified away by investing in both Atlas Corp 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 Atlas Corp and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Corp and American Airlines Group, you can compare the effects of market volatilities on Atlas Corp 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 Atlas Corp with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Corp and American Airlines.
Diversification Opportunities for Atlas Corp and American Airlines
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Atlas and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Atlas Corp 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 Atlas Corp 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 Atlas Corp i.e., Atlas Corp and American Airlines go up and down completely randomly.
Pair Corralation between Atlas Corp and American Airlines
Assuming the 90 days horizon Atlas Corp is expected to generate 29.32 times less return on investment than American Airlines. But when comparing it to its historical volatility, Atlas Corp is 6.53 times less risky than American Airlines. It trades about 0.05 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,104 in American Airlines Group on August 25, 2024 and sell it today you would earn a total of 334.00 from holding American Airlines Group or generate 30.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Corp vs. American Airlines Group
Performance |
| Timeline |
| Atlas Corp |
| American Airlines |
Atlas Corp and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Corp and American Airlines
The main advantage of trading using opposite Atlas Corp and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Corp 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.| Atlas Corp vs. Old Dominion Freight | Atlas Corp vs. ArcBest Corp | Atlas Corp vs. Werner Enterprises | Atlas Corp vs. Knight Transportation |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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