Correlation Between STORE ELECTRONIC and American Airlines
Can any of the company-specific risk be diversified away by investing in both STORE ELECTRONIC 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 STORE ELECTRONIC and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STORE ELECTRONIC and American Airlines Group, you can compare the effects of market volatilities on STORE ELECTRONIC 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 STORE ELECTRONIC with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of STORE ELECTRONIC and American Airlines.
Diversification Opportunities for STORE ELECTRONIC and American Airlines
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STORE and American is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and STORE ELECTRONIC 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 STORE ELECTRONIC 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 STORE ELECTRONIC i.e., STORE ELECTRONIC and American Airlines go up and down completely randomly.
Pair Corralation between STORE ELECTRONIC and American Airlines
Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 115.31 times less return on investment than American Airlines. But when comparing it to its historical volatility, STORE ELECTRONIC is 2.07 times less risky than American Airlines. It trades about 0.0 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,225 in American Airlines Group on September 4, 2024 and sell it today you would earn a total of 134.00 from holding American Airlines Group or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STORE ELECTRONIC vs. American Airlines Group
Performance |
| Timeline |
| STORE ELECTRONIC |
| American Airlines |
STORE ELECTRONIC and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STORE ELECTRONIC and American Airlines
The main advantage of trading using opposite STORE ELECTRONIC and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STORE ELECTRONIC 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.| STORE ELECTRONIC vs. TOTAL GABON | STORE ELECTRONIC vs. Walgreens Boots Alliance | STORE ELECTRONIC vs. Peak Resources Limited |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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