Correlation Between Commonwealth Bank and American Airlines
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and American Airlines Group, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and American Airlines.
Diversification Opportunities for Commonwealth Bank and American Airlines
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and American Airlines go up and down completely randomly.
Pair Corralation between Commonwealth Bank and American Airlines
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.52 times more return on investment than American Airlines. However, Commonwealth Bank of is 1.93 times less risky than American Airlines. It trades about 0.14 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of risk. If you would invest 6,144 in Commonwealth Bank of on September 4, 2024 and sell it today you would earn a total of 3,592 from holding Commonwealth Bank of or generate 58.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. American Airlines Group
Performance |
| Timeline |
| Commonwealth Bank |
| American Airlines |
Commonwealth Bank and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and American Airlines
The main advantage of trading using opposite Commonwealth Bank and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. CARSALESCOM | Commonwealth Bank vs. National Retail Properties | Commonwealth Bank vs. BROADWIND ENRGY | Commonwealth Bank vs. Fukuyama Transporting Co |
| American Airlines vs. Delta Air Lines | American Airlines vs. AIR CHINA LTD | American Airlines vs. RYANAIR HLDGS ADR | American Airlines vs. Southwest Airlines Co |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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