Correlation Between American Airlines and Hawaiian Holdings
Can any of the company-specific risk be diversified away by investing in both American Airlines and Hawaiian Holdings 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 Hawaiian Holdings 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 Hawaiian Holdings, you can compare the effects of market volatilities on American Airlines and Hawaiian Holdings 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 Hawaiian Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Hawaiian Holdings.
Diversification Opportunities for American Airlines and Hawaiian Holdings
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Hawaiian is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings 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 Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of American Airlines i.e., American Airlines and Hawaiian Holdings go up and down completely randomly.
Pair Corralation between American Airlines and Hawaiian Holdings
Considering the 90-day investment horizon American Airlines Group is expected to generate 2.16 times more return on investment than Hawaiian Holdings. However, American Airlines is 2.16 times more volatile than Hawaiian Holdings. It trades about -0.06 of its potential returns per unit of risk. Hawaiian Holdings is currently generating about -0.24 per unit of risk. If you would invest 1,457 in American Airlines Group on January 20, 2024 and sell it today you would lose (55.00) from holding American Airlines Group or give up 3.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Hawaiian Holdings
Performance |
| Timeline |
| American Airlines |
| Hawaiian Holdings |
American Airlines and Hawaiian Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Hawaiian Holdings
The main advantage of trading using opposite American Airlines and Hawaiian Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Hawaiian Holdings 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 Hawaiian Holdings will offset losses from the drop in Hawaiian Holdings' long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| Hawaiian Holdings vs. Southwest Airlines | Hawaiian Holdings vs. JetBlue Airways Corp | Hawaiian Holdings vs. United Airlines Holdings | Hawaiian Holdings vs. Delta Air Lines |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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