Correlation Between Air Transport and American Airlines
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and American Airlines Group, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and American Airlines.
Diversification Opportunities for Air Transport and American Airlines
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and American Airlines go up and down completely randomly.
Pair Corralation between Air Transport and American Airlines
Given the investment horizon of 90 days Air Transport Services is expected to generate 1.76 times more return on investment than American Airlines. However, Air Transport is 1.76 times more volatile than American Airlines Group. It trades about 0.19 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.23 per unit of risk. If you would invest 1,578 in Air Transport Services on August 28, 2024 and sell it today you would earn a total of 619.00 from holding Air Transport Services or generate 39.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. American Airlines Group
Performance |
| Timeline |
| Air Transport Services |
| American Airlines |
Air Transport and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and American Airlines
The main advantage of trading using opposite Air Transport and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |