Correlation Between Metropolitan Land and American Airlines
Can any of the company-specific risk be diversified away by investing in both Metropolitan Land 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 Metropolitan Land and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Land Tbk and American Airlines Group, you can compare the effects of market volatilities on Metropolitan Land 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 Metropolitan Land with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Land and American Airlines.
Diversification Opportunities for Metropolitan Land and American Airlines
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metropolitan and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Land Tbk and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Metropolitan Land 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 Metropolitan Land Tbk 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 Metropolitan Land i.e., Metropolitan Land and American Airlines go up and down completely randomly.
Pair Corralation between Metropolitan Land and American Airlines
Assuming the 90 days trading horizon Metropolitan Land Tbk is expected to generate 0.5 times more return on investment than American Airlines. However, Metropolitan Land Tbk is 2.0 times less risky than American Airlines. It trades about -0.05 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.03 per unit of risk. If you would invest 40,000 in Metropolitan Land Tbk on January 27, 2024 and sell it today you would lose (1,400) from holding Metropolitan Land Tbk or give up 3.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.13% |
| Values | Daily Returns |
Metropolitan Land Tbk vs. American Airlines Group
Performance |
| Timeline |
| Metropolitan Land Tbk |
| American Airlines |
Metropolitan Land and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Land and American Airlines
The main advantage of trading using opposite Metropolitan Land and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Land 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.| Metropolitan Land vs. Intiland Development Tbk | Metropolitan Land vs. Modernland Realty Ltd | Metropolitan Land vs. Lippo Cikarang Tbk | Metropolitan Land vs. Greenwood Sejahtera Tbk |
| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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