Correlation Between Fast Retailing and American Airlines
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and American Airlines Group, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and American Airlines.
Diversification Opportunities for Fast Retailing and American Airlines
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and American Airlines go up and down completely randomly.
Pair Corralation between Fast Retailing and American Airlines
Assuming the 90 days trading horizon Fast Retailing is expected to generate 2.81 times less return on investment than American Airlines. But when comparing it to its historical volatility, Fast Retailing Co is 1.86 times less risky than American Airlines. It trades about 0.15 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 994.00 in American Airlines Group on September 12, 2024 and sell it today you would earn a total of 640.00 from holding American Airlines Group or generate 64.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. American Airlines Group
Performance |
| Timeline |
| Fast Retailing |
| American Airlines |
Fast Retailing and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and American Airlines
The main advantage of trading using opposite Fast Retailing and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. Mitsubishi Materials | Fast Retailing vs. Martin Marietta Materials | Fast Retailing vs. Infrastrutture Wireless Italiane | Fast Retailing vs. The Yokohama Rubber |
| American Airlines vs. Renesas Electronics | American Airlines vs. UMC Electronics Co | American Airlines vs. CARSALESCOM | American Airlines vs. STMICROELECTRONICS |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |