Correlation Between Aura Investments and American Airlines
Can any of the company-specific risk be diversified away by investing in both Aura Investments 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 Aura Investments and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aura Investments and American Airlines Group, you can compare the effects of market volatilities on Aura Investments 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 Aura Investments with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Investments and American Airlines.
Diversification Opportunities for Aura Investments and American Airlines
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aura and American is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aura Investments and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Aura Investments 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 Aura Investments 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 Aura Investments i.e., Aura Investments and American Airlines go up and down completely randomly.
Pair Corralation between Aura Investments and American Airlines
Assuming the 90 days trading horizon Aura Investments is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Aura Investments is 1.14 times less risky than American Airlines. The stock trades about -0.13 of its potential returns per unit of risk. The American Airlines Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,492 in American Airlines Group on January 24, 2024 and sell it today you would lose (39.00) from holding American Airlines Group or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Aura Investments vs. American Airlines Group
Performance |
| Timeline |
| Aura Investments |
| American Airlines |
Aura Investments and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aura Investments and American Airlines
The main advantage of trading using opposite Aura Investments and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aura Investments 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 Aura Investments 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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