Correlation Between Unum and American Airlines
Can any of the company-specific risk be diversified away by investing in both Unum 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 Unum and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unum Group and American Airlines Group, you can compare the effects of market volatilities on Unum 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 Unum with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unum and American Airlines.
Diversification Opportunities for Unum and American Airlines
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Unum and American is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Unum 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 Unum Group 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 Unum i.e., Unum and American Airlines go up and down completely randomly.
Pair Corralation between Unum and American Airlines
Considering the 90-day investment horizon Unum Group is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Unum Group is 2.53 times less risky than American Airlines. The stock trades about -0.17 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,393 in American Airlines Group on January 19, 2024 and sell it today you would earn a total of 30.00 from holding American Airlines Group or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unum Group vs. American Airlines Group
Performance |
| Timeline |
| Unum Group |
| American Airlines |
Unum and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unum and American Airlines
The main advantage of trading using opposite Unum and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unum 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.| Unum vs. Prudential Financial | Unum vs. MetLife | Unum vs. Jackson Financial | Unum vs. Manulife Financial Corp |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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