Correlation Between Thompson Largecap and American Airlines
Can any of the company-specific risk be diversified away by investing in both Thompson Largecap 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 Thompson Largecap and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thompson Largecap Fund and American Airlines Group, you can compare the effects of market volatilities on Thompson Largecap 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 Thompson Largecap with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thompson Largecap and American Airlines.
Diversification Opportunities for Thompson Largecap and American Airlines
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Thompson and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Thompson Largecap Fund and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Thompson Largecap 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 Thompson Largecap Fund 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 Thompson Largecap i.e., Thompson Largecap and American Airlines go up and down completely randomly.
Pair Corralation between Thompson Largecap and American Airlines
Assuming the 90 days horizon Thompson Largecap Fund is expected to under-perform the American Airlines. But the mutual fund apears to be less risky and, when comparing its historical volatility, Thompson Largecap Fund is 3.21 times less risky than American Airlines. The mutual fund trades about -0.16 of its potential returns per unit of risk. The American Airlines Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,492 in American Airlines Group on January 24, 2024 and sell it today you would lose (39.00) from holding American Airlines Group or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thompson Largecap Fund vs. American Airlines Group
Performance |
| Timeline |
| Thompson Largecap |
| American Airlines |
Thompson Largecap and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thompson Largecap and American Airlines
The main advantage of trading using opposite Thompson Largecap and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thompson Largecap 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.| Thompson Largecap vs. Clipper Fund Inc | Thompson Largecap vs. Meridian Trarian Fund | Thompson Largecap vs. Meridian Growth Fund | Thompson Largecap vs. Muhlenkamp Fund Institutional |
| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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