Correlation Between Guangdong Investment and American Airlines
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and American Airlines Group, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and American Airlines.
Diversification Opportunities for Guangdong Investment and American Airlines
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Guangdong and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and American Airlines go up and down completely randomly.
Pair Corralation between Guangdong Investment and American Airlines
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the American Airlines. In addition to that, Guangdong Investment is 1.89 times more volatile than American Airlines Group. It trades about -0.13 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.23 per unit of volatility. If you would invest 1,639 in American Airlines Group on October 25, 2024 and sell it today you would earn a total of 136.00 from holding American Airlines Group or generate 8.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. American Airlines Group
Performance |
| Timeline |
| Guangdong Investment |
| American Airlines |
Guangdong Investment and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and American Airlines
The main advantage of trading using opposite Guangdong Investment and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. American Water Works | Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Gelsenwasser AG | Guangdong Investment vs. American States Water |
| American Airlines vs. BJs Wholesale Club | American Airlines vs. HK Electric Investments | American Airlines vs. SPARTAN STORES | American Airlines vs. Guangdong Investment Limited |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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