Correlation Between Ares Management and United Airlines
Can any of the company-specific risk be diversified away by investing in both Ares Management and United 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 Ares Management and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management and United Airlines Holdings, you can compare the effects of market volatilities on Ares Management and United 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 Ares Management with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and United Airlines.
Diversification Opportunities for Ares Management and United Airlines
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and United is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings and Ares Management 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 Ares Management are associated (or correlated) with United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Ares Management i.e., Ares Management and United Airlines go up and down completely randomly.
Pair Corralation between Ares Management and United Airlines
Assuming the 90 days trading horizon Ares Management is expected to generate 4.14 times less return on investment than United Airlines. But when comparing it to its historical volatility, Ares Management is 1.36 times less risky than United Airlines. It trades about 0.01 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 30,858 in United Airlines Holdings on November 8, 2024 and sell it today you would earn a total of 503.00 from holding United Airlines Holdings or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management vs. United Airlines Holdings
Performance |
| Timeline |
| Ares Management |
| United Airlines Holdings |
Ares Management and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and United Airlines
The main advantage of trading using opposite Ares Management and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, United 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 United Airlines will offset losses from the drop in United Airlines' long position.| Ares Management vs. Taiwan Semiconductor Manufacturing | Ares Management vs. Apple Inc | Ares Management vs. Alibaba Group Holding | Ares Management vs. Microsoft |
| United Airlines vs. Patria Investments Limited | United Airlines vs. Akamai Technologies, | United Airlines vs. Clover Health Investments, | United Airlines vs. DXC Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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