Correlation Between International Consolidated and American Airlines
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and American Airlines Group, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and American Airlines.
Diversification Opportunities for International Consolidated and American Airlines
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and American Airlines go up and down completely randomly.
Pair Corralation between International Consolidated and American Airlines
Assuming the 90 days horizon International Consolidated is expected to generate 2.71 times less return on investment than American Airlines. But when comparing it to its historical volatility, International Consolidated Airlines is 1.53 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 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,692 in American Airlines Group on October 14, 2024 and sell it today you would earn a total of 146.00 from holding American Airlines Group or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. American Airlines Group
Performance |
| Timeline |
| International Consolidated |
| American Airlines |
International Consolidated and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and American Airlines
The main advantage of trading using opposite International Consolidated and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Air France KLM SA | International Consolidated vs. Air France KLM | International Consolidated vs. Finnair Oyj | International Consolidated vs. AirAsia Group Berhad |
| 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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