Correlation Between Volaris and American Airlines
Can any of the company-specific risk be diversified away by investing in both Volaris 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 Volaris and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volaris and American Airlines Group, you can compare the effects of market volatilities on Volaris 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 Volaris with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volaris and American Airlines.
Diversification Opportunities for Volaris and American Airlines
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Volaris and American is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Volaris 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 Volaris 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 Volaris i.e., Volaris and American Airlines go up and down completely randomly.
Pair Corralation between Volaris and American Airlines
Given the investment horizon of 90 days Volaris is expected to generate 1.07 times less return on investment than American Airlines. In addition to that, Volaris is 1.34 times more volatile than American Airlines Group. It trades about 0.01 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.01 per unit of volatility. If you would invest 1,388 in American Airlines Group on January 25, 2024 and sell it today you would earn a total of 4.00 from holding American Airlines Group or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.78% |
| Values | Daily Returns |
Volaris vs. American Airlines Group
Performance |
| Timeline |
| Volaris |
| American Airlines |
Volaris and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volaris and American Airlines
The main advantage of trading using opposite Volaris and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volaris 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.| Volaris vs. Allegiant Travel | Volaris vs. Azul SA | Volaris vs. Alaska Air Group | Volaris vs. International Consolidated Airlines |
| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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