Correlation Between SNDL and American Airlines
Can any of the company-specific risk be diversified away by investing in both SNDL 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 SNDL and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SNDL Inc and American Airlines Group, you can compare the effects of market volatilities on SNDL 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 SNDL with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNDL and American Airlines.
Diversification Opportunities for SNDL and American Airlines
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SNDL and American is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and SNDL 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 SNDL Inc 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 SNDL i.e., SNDL and American Airlines go up and down completely randomly.
Pair Corralation between SNDL and American Airlines
Given the investment horizon of 90 days SNDL Inc is expected to under-perform the American Airlines. In addition to that, SNDL is 1.32 times more volatile than American Airlines Group. It trades about -0.01 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.09 per unit of volatility. If you would invest 1,150 in American Airlines Group on September 2, 2024 and sell it today you would earn a total of 302.00 from holding American Airlines Group or generate 26.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SNDL Inc vs. American Airlines Group
Performance |
| Timeline |
| SNDL Inc |
| American Airlines |
SNDL and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SNDL and American Airlines
The main advantage of trading using opposite SNDL and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNDL 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 SNDL Inc 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. 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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