Correlation Between Chart Industries and American Airlines
Can any of the company-specific risk be diversified away by investing in both Chart Industries 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 Chart Industries and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chart Industries and American Airlines Group, you can compare the effects of market volatilities on Chart Industries 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 Chart Industries with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chart Industries and American Airlines.
Diversification Opportunities for Chart Industries and American Airlines
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chart and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chart Industries and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Chart Industries 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 Chart Industries 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 Chart Industries i.e., Chart Industries and American Airlines go up and down completely randomly.
Pair Corralation between Chart Industries and American Airlines
Given the investment horizon of 90 days Chart Industries is expected to generate 1.53 times more return on investment than American Airlines. However, Chart Industries is 1.53 times more volatile than American Airlines Group. It trades about 0.51 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.28 per unit of risk. If you would invest 14,143 in Chart Industries on September 3, 2024 and sell it today you would earn a total of 5,182 from holding Chart Industries or generate 36.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chart Industries vs. American Airlines Group
Performance |
| Timeline |
| Chart Industries |
| American Airlines |
Chart Industries and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chart Industries and American Airlines
The main advantage of trading using opposite Chart Industries and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chart Industries 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.| Chart Industries vs. Crane NXT Co | Chart Industries vs. Donaldson | Chart Industries vs. ITT Inc | Chart Industries vs. Franklin Electric Co |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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