Correlation Between RETAIL FOOD and American Airlines
Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD 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 RETAIL FOOD and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RETAIL FOOD GROUP and American Airlines Group, you can compare the effects of market volatilities on RETAIL FOOD 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 RETAIL FOOD with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and American Airlines.
Diversification Opportunities for RETAIL FOOD and American Airlines
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RETAIL and American is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and RETAIL FOOD 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 RETAIL FOOD GROUP 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 RETAIL FOOD i.e., RETAIL FOOD and American Airlines go up and down completely randomly.
Pair Corralation between RETAIL FOOD and American Airlines
Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 2.24 times more return on investment than American Airlines. However, RETAIL FOOD is 2.24 times more volatile than American Airlines Group. It trades about -0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.36 per unit of risk. If you would invest 130.00 in RETAIL FOOD GROUP on November 28, 2024 and sell it today you would lose (4.00) from holding RETAIL FOOD GROUP or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RETAIL FOOD GROUP vs. American Airlines Group
Performance |
| Timeline |
| RETAIL FOOD GROUP |
| American Airlines |
RETAIL FOOD and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RETAIL FOOD and American Airlines
The main advantage of trading using opposite RETAIL FOOD and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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.| RETAIL FOOD vs. BG Foods | RETAIL FOOD vs. BOSTON BEER A | RETAIL FOOD vs. Thai Beverage Public | RETAIL FOOD vs. Maple Leaf Foods |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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