Correlation Between Honda and American Airlines
Can any of the company-specific risk be diversified away by investing in both Honda 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 Honda and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honda Motor Co and American Airlines Group, you can compare the effects of market volatilities on Honda 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 Honda with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and American Airlines.
Diversification Opportunities for Honda and American Airlines
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Honda and American is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor 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 Honda 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 Honda Motor 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 Honda i.e., Honda and American Airlines go up and down completely randomly.
Pair Corralation between Honda and American Airlines
Assuming the 90 days trading horizon Honda Motor Co is expected to under-perform the American Airlines. In addition to that, Honda is 1.11 times more volatile than American Airlines Group. It trades about -0.31 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.17 per unit of volatility. If you would invest 7,968 in American Airlines Group on August 30, 2024 and sell it today you would earn a total of 570.00 from holding American Airlines Group or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Honda Motor Co vs. American Airlines Group
Performance |
| Timeline |
| Honda Motor |
| American Airlines |
Honda and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and American Airlines
The main advantage of trading using opposite Honda and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda 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.The idea behind Honda Motor Co and American Airlines Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Airlines vs. Fidelity National Information | American Airlines vs. The Home Depot | American Airlines vs. Paycom Software | American Airlines vs. NXP Semiconductors NV |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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