Correlation Between American Airlines and Volaris
Can any of the company-specific risk be diversified away by investing in both American Airlines and Volaris 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 American Airlines and Volaris into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Volaris, you can compare the effects of market volatilities on American Airlines and Volaris 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 American Airlines with a short position of Volaris. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Volaris.
Diversification Opportunities for American Airlines and Volaris
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Volaris is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris and American Airlines 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 American Airlines Group are associated (or correlated) with Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of American Airlines i.e., American Airlines and Volaris go up and down completely randomly.
Pair Corralation between American Airlines and Volaris
Considering the 90-day investment horizon American Airlines Group is expected to under-perform the Volaris. But the stock apears to be less risky and, when comparing its historical volatility, American Airlines Group is 1.07 times less risky than Volaris. The stock trades about -0.12 of its potential returns per unit of risk. The Volaris is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 735.00 in Volaris on January 27, 2024 and sell it today you would earn a total of 127.00 from holding Volaris or generate 17.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Airlines Group vs. Volaris
Performance |
| Timeline |
| American Airlines |
| Volaris |
American Airlines and Volaris Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Volaris
The main advantage of trading using opposite American Airlines and Volaris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Volaris 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 Volaris will offset losses from the drop in Volaris' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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