Correlation Between BANK OCHINA and American Airlines
Can any of the company-specific risk be diversified away by investing in both BANK OCHINA 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 BANK OCHINA and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK OCHINA H and American Airlines Group, you can compare the effects of market volatilities on BANK OCHINA 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 BANK OCHINA with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OCHINA and American Airlines.
Diversification Opportunities for BANK OCHINA and American Airlines
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANK and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BANK OCHINA H and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and BANK OCHINA 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 BANK OCHINA H 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 BANK OCHINA i.e., BANK OCHINA and American Airlines go up and down completely randomly.
Pair Corralation between BANK OCHINA and American Airlines
Assuming the 90 days trading horizon BANK OCHINA H is expected to generate 0.91 times more return on investment than American Airlines. However, BANK OCHINA H is 1.1 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 0.02 per unit of risk. If you would invest 668.00 in BANK OCHINA H on September 2, 2024 and sell it today you would earn a total of 392.00 from holding BANK OCHINA H or generate 58.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK OCHINA H vs. American Airlines Group
Performance |
| Timeline |
| BANK OCHINA H |
| American Airlines |
BANK OCHINA and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OCHINA and American Airlines
The main advantage of trading using opposite BANK OCHINA and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OCHINA 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.| BANK OCHINA vs. X FAB Silicon Foundries | BANK OCHINA vs. CHEMICAL INDUSTRIES | BANK OCHINA vs. Soken Chemical Engineering | BANK OCHINA vs. Silicon Motion Technology |
| American Airlines vs. Superior Plus Corp | American Airlines vs. NMI Holdings | American Airlines vs. Origin Agritech | American Airlines vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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