Correlation Between Biglari Holdings and American Airlines
Can any of the company-specific risk be diversified away by investing in both Biglari Holdings 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 Biglari Holdings and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biglari Holdings and American Airlines Group, you can compare the effects of market volatilities on Biglari Holdings 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 Biglari Holdings with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biglari Holdings and American Airlines.
Diversification Opportunities for Biglari Holdings and American Airlines
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Biglari and American is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings i.e., Biglari Holdings and American Airlines go up and down completely randomly.
Pair Corralation between Biglari Holdings and American Airlines
Allowing for the 90-day total investment horizon Biglari Holdings is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Biglari Holdings is 1.38 times less risky than American Airlines. The stock trades about -0.07 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biglari Holdings vs. American Airlines Group
Performance |
| Timeline |
| Biglari Holdings |
| American Airlines |
Biglari Holdings and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biglari Holdings and American Airlines
The main advantage of trading using opposite Biglari Holdings and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biglari Holdings 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 Biglari Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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