Correlation Between BEST and American Airlines
Can any of the company-specific risk be diversified away by investing in both BEST 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 BEST and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BEST Inc and American Airlines Group, you can compare the effects of market volatilities on BEST 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 BEST with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEST and American Airlines.
Diversification Opportunities for BEST and American Airlines
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BEST and American is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding BEST Inc and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and BEST 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 BEST Inc 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 BEST i.e., BEST and American Airlines go up and down completely randomly.
Pair Corralation between BEST and American Airlines
Given the investment horizon of 90 days BEST Inc is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, BEST Inc is 7.51 times less risky than American Airlines. The stock trades about -0.21 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,278 in American Airlines Group on August 25, 2024 and sell it today you would earn a total of 160.00 from holding American Airlines Group or generate 12.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BEST Inc vs. American Airlines Group
Performance |
| Timeline |
| BEST Inc |
| American Airlines |
BEST and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BEST and American Airlines
The main advantage of trading using opposite BEST and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BEST 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.| BEST vs. Heartland Express | BEST vs. Universal Logistics Holdings | BEST vs. Marten Transport | BEST vs. Werner Enterprises |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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