Correlation Between Industrial Select and American Airlines
Can any of the company-specific risk be diversified away by investing in both Industrial Select 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 Industrial Select and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and American Airlines Group, you can compare the effects of market volatilities on Industrial Select 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 Industrial Select with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and American Airlines.
Diversification Opportunities for Industrial Select and American Airlines
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Industrial and American is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Industrial Select 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 Industrial Select Sector 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 Industrial Select i.e., Industrial Select and American Airlines go up and down completely randomly.
Pair Corralation between Industrial Select and American Airlines
Considering the 90-day investment horizon Industrial Select Sector is expected to generate 0.28 times more return on investment than American Airlines. However, Industrial Select Sector is 3.58 times less risky than American Airlines. It trades about -0.06 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.1 per unit of risk. If you would invest 12,440 in Industrial Select Sector on January 25, 2024 and sell it today you would lose (133.00) from holding Industrial Select Sector or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. American Airlines Group
Performance |
| Timeline |
| Industrial Select Sector |
| American Airlines |
Industrial Select and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and American Airlines
The main advantage of trading using opposite Industrial Select and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select 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.| Industrial Select vs. Fidelity MSCI Materials | Industrial Select vs. Fidelity MSCI Financials | Industrial Select vs. Fidelity MSCI Consumer | Industrial Select vs. Fidelity MSCI Consumer |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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