Correlation Between National Beverage and American Airlines
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and American Airlines Group, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and American Airlines.
Diversification Opportunities for National Beverage and American Airlines
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and American Airlines go up and down completely randomly.
Pair Corralation between National Beverage and American Airlines
Given the investment horizon of 90 days National Beverage is expected to generate 4.83 times less return on investment than American Airlines. But when comparing it to its historical volatility, National Beverage Corp is 1.86 times less risky than American Airlines. It trades about 0.09 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,156 in American Airlines Group on August 28, 2024 and sell it today you would earn a total of 308.00 from holding American Airlines Group or generate 26.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. American Airlines Group
Performance |
| Timeline |
| National Beverage Corp |
| American Airlines |
National Beverage and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and American Airlines
The main advantage of trading using opposite National Beverage and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
| 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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