Correlation Between Primoris Services and American Airlines
Can any of the company-specific risk be diversified away by investing in both Primoris Services 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 Primoris Services and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Primoris Services and American Airlines Group, you can compare the effects of market volatilities on Primoris Services 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 Primoris Services with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primoris Services and American Airlines.
Diversification Opportunities for Primoris Services and American Airlines
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Primoris and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Primoris Services 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 Primoris Services 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 Primoris Services i.e., Primoris Services and American Airlines go up and down completely randomly.
Pair Corralation between Primoris Services and American Airlines
Given the investment horizon of 90 days Primoris Services is expected to generate 1.76 times more return on investment than American Airlines. However, Primoris Services is 1.76 times more volatile than American Airlines Group. It trades about 0.38 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.28 per unit of risk. If you would invest 6,434 in Primoris Services on September 3, 2024 and sell it today you would earn a total of 1,937 from holding Primoris Services or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Primoris Services vs. American Airlines Group
Performance |
| Timeline |
| Primoris Services |
| American Airlines |
Primoris Services and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Primoris Services and American Airlines
The main advantage of trading using opposite Primoris Services and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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.| Primoris Services vs. MYR Group | Primoris Services vs. Granite Construction Incorporated | Primoris Services vs. Matrix Service Co | Primoris Services vs. Api Group Corp |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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