Correlation Between Software Acquisition and American Airlines
Can any of the company-specific risk be diversified away by investing in both Software Acquisition 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 Software Acquisition and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Acquisition Group and American Airlines Group, you can compare the effects of market volatilities on Software Acquisition 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 Software Acquisition with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Acquisition and American Airlines.
Diversification Opportunities for Software Acquisition and American Airlines
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Software and American is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Software Acquisition 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 Software Acquisition Group 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 Software Acquisition i.e., Software Acquisition and American Airlines go up and down completely randomly.
Pair Corralation between Software Acquisition and American Airlines
Given the investment horizon of 90 days Software Acquisition is expected to generate 2.02 times less return on investment than American Airlines. In addition to that, Software Acquisition is 1.43 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 0.02 per unit of volatility. If you would invest 1,346 in American Airlines Group on September 3, 2024 and sell it today you would earn a total of 106.00 from holding American Airlines Group or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Software Acquisition Group vs. American Airlines Group
Performance |
| Timeline |
| Software Acquisition |
| American Airlines |
Software Acquisition and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Acquisition and American Airlines
The main advantage of trading using opposite Software Acquisition and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Acquisition 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.| Software Acquisition vs. Oatly Group AB | Software Acquisition vs. Westrock Coffee | Software Acquisition vs. Volaris | Software Acquisition vs. Seadrill Limited |
| 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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