Correlation Between Clean Energy and American Airlines
Can any of the company-specific risk be diversified away by investing in both Clean Energy 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 Clean Energy and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Energy Fuels and American Airlines Group, you can compare the effects of market volatilities on Clean Energy 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 Clean Energy with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and American Airlines.
Diversification Opportunities for Clean Energy and American Airlines
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Clean and American is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and American Airlines go up and down completely randomly.
Pair Corralation between Clean Energy and American Airlines
Assuming the 90 days horizon Clean Energy Fuels is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Clean Energy Fuels is 1.35 times less risky than American Airlines. The stock trades about -0.1 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,438 in American Airlines Group on September 24, 2024 and sell it today you would earn a total of 192.00 from holding American Airlines Group or generate 13.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. American Airlines Group
Performance |
| Timeline |
| Clean Energy Fuels |
| American Airlines |
Clean Energy and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and American Airlines
The main advantage of trading using opposite Clean Energy and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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.| Clean Energy vs. Reliance Industries Limited | Clean Energy vs. Marathon Petroleum Corp | Clean Energy vs. Valero Energy | Clean Energy vs. NESTE OYJ UNSPADR |
| American Airlines vs. JD SPORTS FASH | American Airlines vs. Gaztransport Technigaz SA | American Airlines vs. SIEM OFFSHORE NEW | American Airlines vs. CarsalesCom |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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