Correlation Between Gol Linhas and American Airlines

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Can any of the company-specific risk be diversified away by investing in both Gol Linhas 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 Gol Linhas and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gol Linhas Aereas and American Airlines Group, you can compare the effects of market volatilities on Gol Linhas 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 Gol Linhas with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gol Linhas and American Airlines.

Diversification Opportunities for Gol Linhas and American Airlines

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Gol and American is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gol Linhas Aereas and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Gol Linhas 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 Gol Linhas Aereas 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 Gol Linhas i.e., Gol Linhas and American Airlines go up and down completely randomly.

Pair Corralation between Gol Linhas and American Airlines

Considering the 90-day investment horizon Gol Linhas Aereas is expected to under-perform the American Airlines. In addition to that, Gol Linhas is 2.0 times more volatile than American Airlines Group. It trades about -0.04 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  1,697  in American Airlines Group on December 30, 2023 and sell it today you would lose (162.00) from holding American Airlines Group or give up 9.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy92.51%
ValuesDaily Returns

Gol Linhas Aereas  vs.  American Airlines Group

 Performance 
       Timeline  
Gol Linhas Aereas 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Gol Linhas Aereas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
American Airlines 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gol Linhas and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gol Linhas and American Airlines

The main advantage of trading using opposite Gol Linhas and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Linhas 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.
The idea behind Gol Linhas Aereas and American Airlines Group 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.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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