Correlation Between Netanel and American Airlines
Can any of the company-specific risk be diversified away by investing in both Netanel 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 Netanel and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netanel Group and American Airlines Group, you can compare the effects of market volatilities on Netanel 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 Netanel with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netanel and American Airlines.
Diversification Opportunities for Netanel and American Airlines
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Netanel and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Netanel 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 Netanel 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 Netanel 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 Netanel i.e., Netanel and American Airlines go up and down completely randomly.
Pair Corralation between Netanel and American Airlines
Assuming the 90 days trading horizon Netanel Group is expected to generate 1.16 times more return on investment than American Airlines. However, Netanel is 1.16 times more volatile than American Airlines Group. It trades about 0.06 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.03 per unit of risk. If you would invest 85,130 in Netanel Group on January 20, 2024 and sell it today you would earn a total of 26,070 from holding Netanel Group or generate 30.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.05% |
| Values | Daily Returns |
Netanel Group vs. American Airlines Group
Performance |
| Timeline |
| Netanel Group |
| American Airlines |
Netanel and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netanel and American Airlines
The main advantage of trading using opposite Netanel and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netanel 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 Netanel Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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