Correlation Between Quest Diagnostics and American Airlines
Can any of the company-specific risk be diversified away by investing in both Quest Diagnostics 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 Quest Diagnostics and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quest Diagnostics Incorporated and American Airlines Group, you can compare the effects of market volatilities on Quest Diagnostics 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 Quest Diagnostics with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quest Diagnostics and American Airlines.
Diversification Opportunities for Quest Diagnostics and American Airlines
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Quest and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Quest Diagnostics 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 Quest Diagnostics Incorporated 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 Quest Diagnostics i.e., Quest Diagnostics and American Airlines go up and down completely randomly.
Pair Corralation between Quest Diagnostics and American Airlines
Considering the 90-day investment horizon Quest Diagnostics Incorporated is expected to generate 0.54 times more return on investment than American Airlines. However, Quest Diagnostics Incorporated is 1.85 times less risky than American Airlines. It trades about 0.21 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.11 per unit of risk. If you would invest 12,814 in Quest Diagnostics Incorporated on January 26, 2024 and sell it today you would earn a total of 941.00 from holding Quest Diagnostics Incorporated or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Quest Diagnostics Incorporated vs. American Airlines Group
Performance |
| Timeline |
| Quest Diagnostics |
| American Airlines |
Quest Diagnostics and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quest Diagnostics and American Airlines
The main advantage of trading using opposite Quest Diagnostics and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quest Diagnostics 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.| Quest Diagnostics vs. IQVIA Holdings | Quest Diagnostics vs. Mettler Toledo International | Quest Diagnostics vs. Twist Bioscience Corp | Quest Diagnostics vs. Waters |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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