Correlation Between American Airlines and Aegean Airlines

Can any of the company-specific risk be diversified away by investing in both American Airlines and Aegean 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 American Airlines and Aegean Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Airlines Group and Aegean Airlines SA, you can compare the effects of market volatilities on American Airlines and Aegean 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 American Airlines with a short position of Aegean Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Aegean Airlines.

Diversification Opportunities for American Airlines and Aegean Airlines

0.12

Correlation Coefficient

American Airlines  Aegean Airlines

Average diversification

The 3 months correlation between American and Aegean is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA and American Airlines 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 American Airlines Group are associated (or correlated) with Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of American Airlines i.e., American Airlines and Aegean Airlines go up and down completely randomly.

Pair Corralation between American Airlines and Aegean Airlines

Assuming the 90 days horizon American Airlines Group is expected to under-perform the Aegean Airlines. In addition to that, American Airlines is 1.62 times more volatile than Aegean Airlines SA. It trades about -0.31 of its total potential returns per unit of risk. Aegean Airlines SA is currently generating about -0.08 per unit of volatility. If you would invest  1,217  in Aegean Airlines SA on March 12, 2024 and sell it today you would lose (52.00) from holding Aegean Airlines SA or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Airlines Group  vs.  Aegean Airlines SA

American Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aegean Airlines SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aegean Airlines SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aegean Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Airlines and Aegean Airlines

The main advantage of trading using opposite American Airlines and Aegean Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Aegean 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 Aegean Airlines will offset losses from the drop in Aegean Airlines' long position.

The idea behind American Airlines Group and Aegean Airlines SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.