Correlation Between Japan Steel and American Airlines
Can any of the company-specific risk be diversified away by investing in both Japan Steel 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 Japan Steel and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Japan Steel and American Airlines Group, you can compare the effects of market volatilities on Japan Steel 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 Japan Steel with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Steel and American Airlines.
Diversification Opportunities for Japan Steel and American Airlines
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Japan and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Japan Steel 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 The Japan Steel 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 Japan Steel i.e., Japan Steel and American Airlines go up and down completely randomly.
Pair Corralation between Japan Steel and American Airlines
Assuming the 90 days horizon The Japan Steel is expected to under-perform the American Airlines. In addition to that, Japan Steel is 1.19 times more volatile than American Airlines Group. It trades about -0.06 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.0 per unit of volatility. If you would invest 1,650 in American Airlines Group on November 1, 2024 and sell it today you would lose (17.00) from holding American Airlines Group or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Japan Steel vs. American Airlines Group
Performance |
| Timeline |
| Japan Steel |
| American Airlines |
Japan Steel and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Steel and American Airlines
The main advantage of trading using opposite Japan Steel and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel 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.| Japan Steel vs. KOBE STEEL LTD | Japan Steel vs. Daido Steel Co | Japan Steel vs. PKSHA TECHNOLOGY INC | Japan Steel vs. Nippon Steel |
| American Airlines vs. EBRO FOODS | American Airlines vs. GWILLI FOOD | American Airlines vs. United Natural Foods | American Airlines vs. MAGNUM MINING EXP |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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