Correlation Between Werner Enterprises and American Airlines
Can any of the company-specific risk be diversified away by investing in both Werner Enterprises 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 Werner Enterprises and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Werner Enterprises and American Airlines Group, you can compare the effects of market volatilities on Werner Enterprises 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 Werner Enterprises with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Werner Enterprises and American Airlines.
Diversification Opportunities for Werner Enterprises and American Airlines
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Werner and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and American Airlines go up and down completely randomly.
Pair Corralation between Werner Enterprises and American Airlines
Given the investment horizon of 90 days Werner Enterprises is expected to generate 4.44 times less return on investment than American Airlines. But when comparing it to its historical volatility, Werner Enterprises is 1.31 times less risky than American Airlines. It trades about 0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,021 in American Airlines Group on August 25, 2024 and sell it today you would earn a total of 417.00 from holding American Airlines Group or generate 40.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Werner Enterprises vs. American Airlines Group
Performance |
| Timeline |
| Werner Enterprises |
| American Airlines |
Werner Enterprises and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Werner Enterprises and American Airlines
The main advantage of trading using opposite Werner Enterprises and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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.| Werner Enterprises vs. Heartland Express | Werner Enterprises vs. Universal Logistics Holdings | Werner Enterprises vs. Schneider National | Werner Enterprises vs. Marten Transport |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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