Correlation Between JetBlue Airways and American Airlines
Can any of the company-specific risk be diversified away by investing in both JetBlue Airways 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 JetBlue Airways and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JetBlue Airways Corp and American Airlines Group, you can compare the effects of market volatilities on JetBlue Airways 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 JetBlue Airways with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of JetBlue Airways and American Airlines.
Diversification Opportunities for JetBlue Airways and American Airlines
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between JetBlue and American is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and JetBlue Airways 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 JetBlue Airways Corp 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 JetBlue Airways i.e., JetBlue Airways and American Airlines go up and down completely randomly.
Pair Corralation between JetBlue Airways and American Airlines
Given the investment horizon of 90 days JetBlue Airways Corp is expected to under-perform the American Airlines. In addition to that, JetBlue Airways is 1.82 times more volatile than American Airlines Group. It trades about -0.22 of its total potential returns per unit of risk. American Airlines Group is currently generating about -0.13 per unit of volatility. If you would invest 1,530 in American Airlines Group on January 27, 2024 and sell it today you would lose (117.00) from holding American Airlines Group or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JetBlue Airways Corp vs. American Airlines Group
Performance |
| Timeline |
| JetBlue Airways Corp |
| American Airlines |
JetBlue Airways and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JetBlue Airways and American Airlines
The main advantage of trading using opposite JetBlue Airways and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways 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.| JetBlue Airways vs. Frontier Group Holdings | JetBlue Airways vs. Southwest Airlines | JetBlue Airways vs. United Airlines Holdings | JetBlue Airways vs. American Airlines Group |
| 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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