Correlation Between Tower Semiconductor and American Airlines
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor 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 Tower Semiconductor and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and American Airlines Group, you can compare the effects of market volatilities on Tower Semiconductor 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 Tower Semiconductor with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and American Airlines.
Diversification Opportunities for Tower Semiconductor and American Airlines
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tower and American is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and American Airlines go up and down completely randomly.
Pair Corralation between Tower Semiconductor and American Airlines
Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 0.72 times more return on investment than American Airlines. However, Tower Semiconductor is 1.39 times less risky than American Airlines. It trades about -0.03 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 1,210,000 in Tower Semiconductor on January 20, 2024 and sell it today you would lose (19,000) from holding Tower Semiconductor or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Tower Semiconductor vs. American Airlines Group
Performance |
| Timeline |
| Tower Semiconductor |
| American Airlines |
Tower Semiconductor and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and American Airlines
The main advantage of trading using opposite Tower Semiconductor and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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.| Tower Semiconductor vs. Automatic Bank Services | Tower Semiconductor vs. EN Shoham Business | Tower Semiconductor vs. Rapac Communication Infrastructure | Tower Semiconductor vs. Tadiran Hldg |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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