Correlation Between Talgo SA and American Airlines

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Can any of the company-specific risk be diversified away by investing in both Talgo SA 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 Talgo SA and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talgo SA and American Airlines Group, you can compare the effects of market volatilities on Talgo SA 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 Talgo SA with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talgo SA and American Airlines.

Diversification Opportunities for Talgo SA and American Airlines

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Talgo and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Talgo SA and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Talgo SA 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 Talgo SA 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 Talgo SA i.e., Talgo SA and American Airlines go up and down completely randomly.

Pair Corralation between Talgo SA and American Airlines

Assuming the 90 days trading horizon Talgo SA is expected to generate 1.03 times more return on investment than American Airlines. However, Talgo SA is 1.03 times more volatile than American Airlines Group. It trades about 0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.02 per unit of risk. If you would invest  432.00  in Talgo SA on December 29, 2023 and sell it today you would earn a total of  13.00  from holding Talgo SA or generate 3.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Talgo SA  vs.  American Airlines Group

 Performance 
       Timeline  
Talgo SA 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Talgo SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Talgo SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
American Airlines 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Talgo SA and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Talgo SA and American Airlines

The main advantage of trading using opposite Talgo SA and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talgo SA 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 Talgo SA 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.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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