Correlation Between Chegg and American Airlines

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

Diversification Opportunities for Chegg and American Airlines

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Chegg and American is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chegg Inc and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Chegg 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 Chegg Inc 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 Chegg i.e., Chegg and American Airlines go up and down completely randomly.

Pair Corralation between Chegg and American Airlines

Given the investment horizon of 90 days Chegg Inc is expected to under-perform the American Airlines. In addition to that, Chegg is 1.27 times more volatile than American Airlines Group. It trades about -0.2 of its total potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of volatility. If you would invest  1,546  in American Airlines Group on December 30, 2023 and sell it today you would lose (11.00) from holding American Airlines Group or give up 0.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chegg Inc  vs.  American Airlines Group

 Performance 
       Timeline  
Chegg Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Chegg Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
American Airlines 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 6 (%) 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.

Chegg and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chegg and American Airlines

The main advantage of trading using opposite Chegg and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chegg 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 Chegg Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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