Correlation Between American Airlines and MetLife
Can any of the company-specific risk be diversified away by investing in both American Airlines and MetLife 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 MetLife 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 MetLife, you can compare the effects of market volatilities on American Airlines and MetLife 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 MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and MetLife.
Diversification Opportunities for American Airlines and MetLife
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and MetLife is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife 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 MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of American Airlines i.e., American Airlines and MetLife go up and down completely randomly.
Pair Corralation between American Airlines and MetLife
Considering the 90-day investment horizon American Airlines Group is expected to under-perform the MetLife. In addition to that, American Airlines is 2.84 times more volatile than MetLife. It trades about -0.03 of its total potential returns per unit of risk. MetLife is currently generating about 0.11 per unit of volatility. If you would invest 6,933 in MetLife on January 24, 2024 and sell it today you would earn a total of 263.00 from holding MetLife or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. MetLife
Performance |
| Timeline |
| American Airlines |
| MetLife |
American Airlines and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and MetLife
The main advantage of trading using opposite American Airlines and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, MetLife 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 MetLife will offset losses from the drop in MetLife's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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