Correlation Between Steven Madden and American Airlines
Can any of the company-specific risk be diversified away by investing in both Steven Madden 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 Steven Madden and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steven Madden and American Airlines Group, you can compare the effects of market volatilities on Steven Madden 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 Steven Madden with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steven Madden and American Airlines.
Diversification Opportunities for Steven Madden and American Airlines
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steven and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Steven Madden 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 Steven Madden 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 Steven Madden i.e., Steven Madden and American Airlines go up and down completely randomly.
Pair Corralation between Steven Madden and American Airlines
Given the investment horizon of 90 days Steven Madden is expected to generate 3.36 times less return on investment than American Airlines. But when comparing it to its historical volatility, Steven Madden is 1.14 times less risky than American Airlines. It trades about 0.05 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,354 in American Airlines Group on September 2, 2024 and sell it today you would earn a total of 98.00 from holding American Airlines Group or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steven Madden vs. American Airlines Group
Performance |
| Timeline |
| Steven Madden |
| American Airlines |
Steven Madden and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steven Madden and American Airlines
The main advantage of trading using opposite Steven Madden and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden 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.| Steven Madden vs. Weyco Group | Steven Madden vs. Caleres | Steven Madden vs. Rocky Brands | Steven Madden vs. Designer Brands |
| American Airlines vs. Canadian Pacific Railway | American Airlines vs. Werner Enterprises | American Airlines vs. Canadian National Railway | American Airlines vs. CSX Corporation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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