Correlation Between American Airlines and Westrock Coffee

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

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

Diversification Opportunities for American Airlines and Westrock Coffee

0.83

Correlation Coefficient

American Airlines  Westrock Coffee

Very poor diversification

The 3 months correlation between American and Westrock is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee and American Airlines 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 American Airlines Group are associated (or correlated) with Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of American Airlines i.e., American Airlines and Westrock Coffee go up and down completely randomly.

Pair Corralation between American Airlines and Westrock Coffee

Considering the 90-day investment horizon American Airlines Group is expected to generate 1.14 times more return on investment than Westrock Coffee. However, American Airlines is 1.14 times more volatile than Westrock Coffee. It trades about -0.02 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.05 per unit of risk. If you would invest  1,183  in American Airlines Group on March 24, 2025 and sell it today you would lose (121.00) from holding American Airlines Group or give up 10.23% of portfolio value over 90 days.

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

American Airlines Group  vs.  Westrock Coffee

American Airlines

Risk-Adjusted Performance

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.

Westrock Coffee

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with American Airlines and Westrock Coffee

The main advantage of trading using opposite American Airlines and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.

The idea behind American Airlines Group and Westrock Coffee 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.