Correlation Between Singapore Airlines and American Airlines
Can any of the company-specific risk be diversified away by investing in both Singapore Airlines 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 Singapore Airlines and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Airlines Limited and American Airlines Group, you can compare the effects of market volatilities on Singapore Airlines 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 Singapore Airlines with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Airlines and American Airlines.
Diversification Opportunities for Singapore Airlines and American Airlines
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Singapore and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Singapore 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 Singapore Airlines Limited 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 Singapore Airlines i.e., Singapore Airlines and American Airlines go up and down completely randomly.
Pair Corralation between Singapore Airlines and American Airlines
Assuming the 90 days trading horizon Singapore Airlines Limited is expected to generate 0.2 times more return on investment than American Airlines. However, Singapore Airlines Limited is 5.01 times less risky than American Airlines. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.31 per unit of risk. If you would invest 463.00 in Singapore Airlines Limited on March 12, 2024 and sell it today you would earn a total of 1.00 from holding Singapore Airlines Limited or generate 0.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Singapore Airlines Limited vs. American Airlines Group
Performance |
Timeline |
Singapore Airlines |
American Airlines |
Singapore Airlines and American Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Singapore Airlines and American Airlines
The main advantage of trading using opposite Singapore Airlines and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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.Singapore Airlines vs. LATAM Airlines Group | Singapore Airlines vs. Air China Limited | Singapore Airlines vs. RYANAIR HLDGS ADR | Singapore Airlines vs. Southwest Airlines Co |
American Airlines vs. LATAM Airlines Group | American Airlines vs. Air China Limited | American Airlines vs. RYANAIR HLDGS ADR | American Airlines vs. Southwest Airlines Co |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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