Correlation Between American Airlines and Hawaiian Holdings

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Can any of the company-specific risk be diversified away by investing in both American Airlines and Hawaiian Holdings 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 American Airlines and Hawaiian Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Hawaiian Holdings, you can compare the effects of market volatilities on American Airlines and Hawaiian Holdings 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 American Airlines with a short position of Hawaiian Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Hawaiian Holdings.

Diversification Opportunities for American Airlines and Hawaiian Holdings

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between American and Hawaiian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings and American Airlines 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 American Airlines Group are associated (or correlated) with Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of American Airlines i.e., American Airlines and Hawaiian Holdings go up and down completely randomly.

Pair Corralation between American Airlines and Hawaiian Holdings

Considering the 90-day investment horizon American Airlines Group is expected to under-perform the Hawaiian Holdings. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 3.33 times less risky than Hawaiian Holdings. The stock trades about 0.0 of its potential returns per unit of risk. The Hawaiian Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,912  in Hawaiian Holdings on December 20, 2023 and sell it today you would lose (554.00) from holding Hawaiian Holdings or give up 28.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

American Airlines Group  vs.  Hawaiian Holdings

 Performance 
       Timeline  
American Airlines 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, American Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Hawaiian Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Airlines and Hawaiian Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Airlines and Hawaiian Holdings

The main advantage of trading using opposite American Airlines and Hawaiian Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Hawaiian Holdings 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 Hawaiian Holdings will offset losses from the drop in Hawaiian Holdings' long position.
The idea behind American Airlines Group and Hawaiian Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Stocks Directory module to find actively traded stocks across global markets.

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