Correlation Between Q2 Holdings and American Airlines
Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Q2 Holdings and American Airlines Group, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and American Airlines.
Diversification Opportunities for Q2 Holdings and American Airlines
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between QTWO and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and American Airlines go up and down completely randomly.
Pair Corralation between Q2 Holdings and American Airlines
Given the investment horizon of 90 days Q2 Holdings is expected to generate 1.4 times more return on investment than American Airlines. However, Q2 Holdings is 1.4 times more volatile than American Airlines Group. It trades about 0.34 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.15 per unit of risk. If you would invest 8,450 in Q2 Holdings on August 29, 2024 and sell it today you would earn a total of 2,249 from holding Q2 Holdings or generate 26.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Q2 Holdings vs. American Airlines Group
Performance |
| Timeline |
| Q2 Holdings |
| American Airlines |
Q2 Holdings and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Q2 Holdings and American Airlines
The main advantage of trading using opposite Q2 Holdings and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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 Q2 Holdings 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. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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