Correlation Between Abbott Laboratories and United Airlines
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories 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 Abbott Laboratories and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and United Airlines Holdings, you can compare the effects of market volatilities on Abbott Laboratories 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 Abbott Laboratories with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and United Airlines.
Diversification Opportunities for Abbott Laboratories and United Airlines
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Abbott and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories i.e., Abbott Laboratories and United Airlines go up and down completely randomly.
Pair Corralation between Abbott Laboratories and United Airlines
Assuming the 90 days trading horizon Abbott Laboratories is expected to generate 6.01 times less return on investment than United Airlines. But when comparing it to its historical volatility, Abbott Laboratories is 1.76 times less risky than United Airlines. It trades about 0.02 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 81,899 in United Airlines Holdings on September 2, 2024 and sell it today you would earn a total of 114,901 from holding United Airlines Holdings or generate 140.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Abbott Laboratories vs. United Airlines Holdings
Performance |
| Timeline |
| Abbott Laboratories |
| United Airlines Holdings |
Abbott Laboratories and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and United Airlines
The main advantage of trading using opposite Abbott Laboratories and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories 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.| Abbott Laboratories vs. Grupo Sports World | Abbott Laboratories vs. Hoteles City Express | Abbott Laboratories vs. United Airlines Holdings | Abbott Laboratories vs. Ameriprise Financial |
| United Airlines vs. Grupo Hotelero Santa | United Airlines vs. UnitedHealth Group Incorporated | United Airlines vs. Micron Technology | United Airlines vs. Delta Air Lines |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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