Correlation Between Israel Discount and American Airlines
Can any of the company-specific risk be diversified away by investing in both Israel Discount 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 Israel Discount and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Israel Discount Bank and American Airlines Group, you can compare the effects of market volatilities on Israel Discount 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 Israel Discount with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Israel Discount and American Airlines.
Diversification Opportunities for Israel Discount and American Airlines
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Israel and American is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Israel Discount Bank and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Israel Discount 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 Israel Discount Bank 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 Israel Discount i.e., Israel Discount and American Airlines go up and down completely randomly.
Pair Corralation between Israel Discount and American Airlines
Assuming the 90 days trading horizon Israel Discount Bank is expected to generate 1.01 times more return on investment than American Airlines. However, Israel Discount is 1.01 times more volatile than American Airlines Group. It trades about 0.08 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 185,714 in Israel Discount Bank on January 25, 2024 and sell it today you would earn a total of 5,986 from holding Israel Discount Bank or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Israel Discount Bank vs. American Airlines Group
Performance |
| Timeline |
| Israel Discount Bank |
| American Airlines |
Israel Discount and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Israel Discount and American Airlines
The main advantage of trading using opposite Israel Discount and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Israel Discount 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 Israel Discount Bank 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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