Correlation Between Intel and American Airlines

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

Diversification Opportunities for Intel and American Airlines

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Intel and American is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Intel and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Intel 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 Intel 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 Intel i.e., Intel and American Airlines go up and down completely randomly.

Pair Corralation between Intel and American Airlines

Given the investment horizon of 90 days Intel is expected to generate 1.27 times more return on investment than American Airlines. However, Intel is 1.27 times more volatile than American Airlines Group. It trades about 0.1 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest  4,199  in Intel on December 30, 2023 and sell it today you would earn a total of  218.00  from holding Intel or generate 5.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Intel  vs.  American Airlines Group

 Performance 
       Timeline  
Intel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
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.

Intel and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Intel and American Airlines

The main advantage of trading using opposite Intel and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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