Correlation Between Diamond Offshore and American Airlines
Can any of the company-specific risk be diversified away by investing in both Diamond Offshore 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 Diamond Offshore and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Offshore Drilling and American Airlines Group, you can compare the effects of market volatilities on Diamond Offshore 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 Diamond Offshore with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Offshore and American Airlines.
Diversification Opportunities for Diamond Offshore and American Airlines
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diamond and American is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Offshore Drilling and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Diamond Offshore 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 Diamond Offshore Drilling 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 Diamond Offshore i.e., Diamond Offshore and American Airlines go up and down completely randomly.
Pair Corralation between Diamond Offshore and American Airlines
Allowing for the 90-day total investment horizon Diamond Offshore Drilling is expected to generate 0.75 times more return on investment than American Airlines. However, Diamond Offshore Drilling is 1.33 times less risky than American Airlines. It trades about -0.05 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.06 per unit of risk. If you would invest 1,317 in Diamond Offshore Drilling on January 20, 2024 and sell it today you would lose (31.00) from holding Diamond Offshore Drilling or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Offshore Drilling vs. American Airlines Group
Performance |
| Timeline |
| Diamond Offshore Drilling |
| American Airlines |
Diamond Offshore and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Offshore and American Airlines
The main advantage of trading using opposite Diamond Offshore and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Offshore 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.| Diamond Offshore vs. Seadrill Limited | Diamond Offshore vs. Nabors Industries | Diamond Offshore vs. Borr Drilling | Diamond Offshore vs. Patterson UTI Energy |
| 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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