Correlation Between IShares Russell and American Airlines
Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 IShares Russell and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 3000 and American Airlines Group, you can compare the effects of market volatilities on IShares Russell 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 IShares Russell with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and American Airlines.
Diversification Opportunities for IShares Russell and American Airlines
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 3000 and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and IShares Russell 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 iShares Russell 3000 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 IShares Russell i.e., IShares Russell and American Airlines go up and down completely randomly.
Pair Corralation between IShares Russell and American Airlines
Considering the 90-day investment horizon iShares Russell 3000 is expected to generate 0.29 times more return on investment than American Airlines. However, iShares Russell 3000 is 3.42 times less risky than American Airlines. It trades about -0.15 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.11 per unit of risk. If you would invest 29,695 in iShares Russell 3000 on January 26, 2024 and sell it today you would lose (775.00) from holding iShares Russell 3000 or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Russell 3000 vs. American Airlines Group
Performance |
| Timeline |
| iShares Russell 3000 |
| American Airlines |
IShares Russell and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and American Airlines
The main advantage of trading using opposite IShares Russell and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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.| IShares Russell vs. SPDR MSCI EAFE | IShares Russell vs. SPDR MSCI Emerging | IShares Russell vs. SPDR Russell 1000 | IShares Russell vs. SPDR Russell 1000 |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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