Correlation Between Walt Disney and American Airlines
Can any of the company-specific risk be diversified away by investing in both Walt Disney 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 Walt Disney 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 Walt Disney and American Airlines Group, you can compare the effects of market volatilities on Walt Disney 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 Walt Disney with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walt Disney and American Airlines.
Diversification Opportunities for Walt Disney and American Airlines
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Walt and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Walt Disney 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 Walt Disney 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 Walt Disney i.e., Walt Disney and American Airlines go up and down completely randomly.
Pair Corralation between Walt Disney and American Airlines
Assuming the 90 days trading horizon Walt Disney is expected to generate 8.7 times less return on investment than American Airlines. But when comparing it to its historical volatility, The Walt Disney is 2.64 times less risky than American Airlines. It trades about 0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 8,731 in American Airlines Group on September 24, 2024 and sell it today you would earn a total of 1,940 from holding American Airlines Group or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Walt Disney vs. American Airlines Group
Performance |
| Timeline |
| Walt Disney |
| American Airlines |
Walt Disney and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walt Disney and American Airlines
The main advantage of trading using opposite Walt Disney and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walt Disney 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.| Walt Disney vs. Marvell Technology | Walt Disney vs. Align Technology | Walt Disney vs. GP Investments | Walt Disney vs. Verizon Communications |
| American Airlines vs. New Oriental Education | American Airlines vs. Paycom Software | American Airlines vs. Dell Technologies | American Airlines vs. Lupatech SA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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