Correlation Between American Airlines and Target
Can any of the company-specific risk be diversified away by investing in both American Airlines and Target 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 Target 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 Target, you can compare the effects of market volatilities on American Airlines and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Target.
Diversification Opportunities for American Airlines and Target
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Target is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of American Airlines i.e., American Airlines and Target go up and down completely randomly.
Pair Corralation between American Airlines and Target
Considering the 90-day investment horizon American Airlines Group is expected to under-perform the Target. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 1.38 times less risky than Target. The stock trades about -0.02 of its potential returns per unit of risk. The Target is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 15,199 in Target on December 29, 2023 and sell it today you would earn a total of 2,268 from holding Target or generate 14.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Airlines Group vs. Target
Performance |
Timeline |
American Airlines |
Target |
American Airlines and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Airlines and Target
The main advantage of trading using opposite American Airlines and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.American Airlines vs. Canadian Pacific Railway | American Airlines vs. Daseke Inc | American Airlines vs. Marten Transport | American Airlines vs. Werner Enterprises |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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