Correlation Between SPDR Bloomberg and American Airlines
Can any of the company-specific risk be diversified away by investing in both SPDR Bloomberg 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 SPDR Bloomberg and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Bloomberg High and American Airlines Group, you can compare the effects of market volatilities on SPDR Bloomberg 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 SPDR Bloomberg with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and American Airlines.
Diversification Opportunities for SPDR Bloomberg and American Airlines
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPDR and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg High and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and SPDR Bloomberg 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 SPDR Bloomberg High 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 SPDR Bloomberg i.e., SPDR Bloomberg and American Airlines go up and down completely randomly.
Pair Corralation between SPDR Bloomberg and American Airlines
Considering the 90-day investment horizon SPDR Bloomberg High is expected to generate 0.15 times more return on investment than American Airlines. However, SPDR Bloomberg High is 6.48 times less risky than American Airlines. It trades about -0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.07 per unit of risk. If you would invest 9,451 in SPDR Bloomberg High on January 25, 2024 and sell it today you would lose (67.00) from holding SPDR Bloomberg High or give up 0.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR Bloomberg High vs. American Airlines Group
Performance |
| Timeline |
| SPDR Bloomberg High |
| American Airlines |
SPDR Bloomberg and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Bloomberg and American Airlines
The main advantage of trading using opposite SPDR Bloomberg and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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.The idea behind SPDR Bloomberg High and American Airlines Group 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.| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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