Correlation Between American Airlines and Newell Brands
Can any of the company-specific risk be diversified away by investing in both American Airlines and Newell Brands 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 Newell Brands 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 Newell Brands, you can compare the effects of market volatilities on American Airlines and Newell Brands 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 Newell Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Newell Brands.
Diversification Opportunities for American Airlines and Newell Brands
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Newell is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of American Airlines i.e., American Airlines and Newell Brands go up and down completely randomly.
Pair Corralation between American Airlines and Newell Brands
Considering the 90-day investment horizon American Airlines Group is expected to generate 1.07 times more return on investment than Newell Brands. However, American Airlines is 1.07 times more volatile than Newell Brands. It trades about -0.06 of its potential returns per unit of risk. Newell Brands is currently generating about -0.21 per unit of risk. If you would invest 1,457 in American Airlines Group on January 20, 2024 and sell it today you would lose (55.00) from holding American Airlines Group or give up 3.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Airlines Group vs. Newell Brands
Performance |
| Timeline |
| American Airlines |
| Newell Brands |
American Airlines and Newell Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Newell Brands
The main advantage of trading using opposite American Airlines and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Newell Brands 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 Newell Brands will offset losses from the drop in Newell Brands' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| Newell Brands vs. The Clorox | Newell Brands vs. Colgate Palmolive | Newell Brands vs. Procter Gamble | Newell Brands vs. Unilever PLC ADR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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