Correlation Between TAL Education and American Airlines
Can any of the company-specific risk be diversified away by investing in both TAL Education 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 TAL Education and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAL Education Group and American Airlines Group, you can compare the effects of market volatilities on TAL Education 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 TAL Education with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and American Airlines.
Diversification Opportunities for TAL Education and American Airlines
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between TAL and American is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education 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 TAL Education 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 TAL Education 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 TAL Education i.e., TAL Education and American Airlines go up and down completely randomly.
Pair Corralation between TAL Education and American Airlines
Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.66 times more return on investment than American Airlines. However, TAL Education is 1.66 times more volatile than American Airlines Group. It trades about 0.06 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of risk. If you would invest 378.00 in TAL Education Group on November 19, 2024 and sell it today you would earn a total of 455.00 from holding TAL Education Group or generate 120.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TAL Education Group vs. American Airlines Group
Performance |
| Timeline |
| TAL Education Group |
| American Airlines |
TAL Education and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and American Airlines
The main advantage of trading using opposite TAL Education and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education 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.| TAL Education vs. MAHLE Metal Leve | TAL Education vs. Hormel Foods | TAL Education vs. Applied Materials, | TAL Education vs. Metalurgica Gerdau SA |
| American Airlines vs. Metalrgica Riosulense SA | American Airlines vs. Vulcan Materials | American Airlines vs. Metalurgica Gerdau SA | American Airlines vs. GP Investments |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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