Correlation Between Invesco Global and American Airlines

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

Diversification Opportunities for Invesco Global and American Airlines

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Global Listed and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Invesco Global 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 Invesco Global Listed 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 Invesco Global i.e., Invesco Global and American Airlines go up and down completely randomly.

Pair Corralation between Invesco Global and American Airlines

Considering the 90-day investment horizon Invesco Global Listed is expected to generate 0.45 times more return on investment than American Airlines. However, Invesco Global Listed is 2.22 times less risky than American Airlines. It trades about 0.19 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest  6,343  in Invesco Global Listed on December 30, 2023 and sell it today you would earn a total of  253.00  from holding Invesco Global Listed or generate 3.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco Global Listed  vs.  American Airlines Group

 Performance 
       Timeline  
Invesco Global Listed 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Global Listed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Invesco Global may actually be approaching a critical reversion point that can send shares even higher in April 2024.
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.

Invesco Global and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco Global and American Airlines

The main advantage of trading using opposite Invesco Global and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Global 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 Invesco Global Listed 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.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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