Correlation Between American Airlines and United Airlines
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and United Airlines 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 United Airlines Holdings, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and United Airlines.
Diversification Opportunities for American Airlines and United Airlines
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and United is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group 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 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 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 American Airlines i.e., American Airlines and United Airlines go up and down completely randomly.
Pair Corralation between American Airlines and United Airlines
Considering the 90-day investment horizon American Airlines is expected to generate 6.69 times less return on investment than United Airlines. But when comparing it to its historical volatility, American Airlines Group is 1.07 times less risky than United Airlines. It trades about 0.03 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 5,064 in United Airlines Holdings on August 23, 2024 and sell it today you would earn a total of 4,456 from holding United Airlines Holdings or generate 87.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. United Airlines Holdings
Performance |
| Timeline |
| American Airlines |
| United Airlines Holdings |
American Airlines and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and United Airlines
The main advantage of trading using opposite American Airlines and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |