Correlation Between Boeing and American Airlines
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and American Airlines Group, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and American Airlines.
Diversification Opportunities for Boeing and American Airlines
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Boeing and American is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Boeing 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 The Boeing 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 Boeing i.e., Boeing and American Airlines go up and down completely randomly.
Pair Corralation between Boeing and American Airlines
Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.26 times less risky than American Airlines. The stock trades about -0.04 of its potential returns per unit of risk. The 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. American Airlines Group
Performance |
| Timeline |
| Boeing |
| American Airlines |
Boeing and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and American Airlines
The main advantage of trading using opposite Boeing and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.The idea behind The Boeing and American Airlines Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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