Correlation Between Bloom Energy and American Airlines

Can any of the company-specific risk be diversified away by investing in both Bloom Energy 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 Bloom Energy and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bloom Energy Corp and American Airlines Group, you can compare the effects of market volatilities on Bloom Energy 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 Bloom Energy with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Energy and American Airlines.

Diversification Opportunities for Bloom Energy and American Airlines

-0.12

Correlation Coefficient

Bloom Energy  American Airlines

Good diversification

The 3 months correlation between Bloom and American is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Bloom Energy 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 Bloom Energy Corp 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 Bloom Energy i.e., Bloom Energy and American Airlines go up and down completely randomly.

Pair Corralation between Bloom Energy and American Airlines

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 1.54 times more return on investment than American Airlines. However, Bloom Energy is 1.54 times more volatile than American Airlines Group. It trades about 0.01 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.0 per unit of risk. If you would invest  1,359  in Bloom Energy Corp on January 28, 2024 and sell it today you would lose (299.00) from holding Bloom Energy Corp or give up 22.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bloom Energy Corp  vs.  American Airlines Group

Bloom Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloom Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bloom Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

American Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bloom Energy and American Airlines

The main advantage of trading using opposite Bloom Energy and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloom Energy 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 Bloom Energy Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.