Correlation Between Xtrackers California and American Airlines
Can any of the company-specific risk be diversified away by investing in both Xtrackers California 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 Xtrackers California and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers California Municipal and American Airlines Group, you can compare the effects of market volatilities on Xtrackers California 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 Xtrackers California with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and American Airlines.
Diversification Opportunities for Xtrackers California and American Airlines
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Xtrackers and American is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Xtrackers California 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 Xtrackers California Municipal 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 Xtrackers California i.e., Xtrackers California and American Airlines go up and down completely randomly.
Pair Corralation between Xtrackers California and American Airlines
Allowing for the 90-day total investment horizon Xtrackers California Municipal is expected to generate 0.08 times more return on investment than American Airlines. However, Xtrackers California Municipal is 12.32 times less risky than American Airlines. It trades about -0.04 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest 2,503 in Xtrackers California Municipal on January 21, 2024 and sell it today you would lose (19.00) from holding Xtrackers California Municipal or give up 0.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 17.78% |
| Values | Daily Returns |
Xtrackers California Municipal vs. American Airlines Group
Performance |
| Timeline |
| Xtrackers California |
| American Airlines |
Xtrackers California and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers California and American Airlines
The main advantage of trading using opposite Xtrackers California and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California 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.| Xtrackers California vs. Vanguard Total Stock | Xtrackers California vs. SPDR SP 500 | Xtrackers California vs. iShares Core SP | Xtrackers California vs. Vanguard Total Bond |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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