Correlation Between Hawaiian Holdings and American Airlines

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

Diversification Opportunities for Hawaiian Holdings and American Airlines

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Hawaiian and American is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Hawaiian Holdings 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 Hawaiian Holdings 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 Hawaiian Holdings i.e., Hawaiian Holdings and American Airlines go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and American Airlines

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Hawaiian Holdings is 1.79 times less risky than American Airlines. The stock trades about -0.17 of its potential returns per unit of risk. The American Airlines Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. 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 Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hawaiian Holdings  vs.  American Airlines Group

 Performance 
       Timeline  
Hawaiian Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
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.

Hawaiian Holdings and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hawaiian Holdings and American Airlines

The main advantage of trading using opposite Hawaiian Holdings and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Holdings 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 Hawaiian Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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