Correlation Between Air Transport and United Parks
Can any of the company-specific risk be diversified away by investing in both Air Transport and United Parks 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 Air Transport and United Parks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and United Parks Resorts, you can compare the effects of market volatilities on Air Transport and United Parks 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 Air Transport with a short position of United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and United Parks.
Diversification Opportunities for Air Transport and United Parks
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and United is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts and Air Transport 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 Air Transport Services are associated (or correlated) with United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Air Transport i.e., Air Transport and United Parks go up and down completely randomly.
Pair Corralation between Air Transport and United Parks
Given the investment horizon of 90 days Air Transport is expected to generate 5.33 times less return on investment than United Parks. In addition to that, Air Transport is 1.47 times more volatile than United Parks Resorts. It trades about 0.0 of its total potential returns per unit of risk. United Parks Resorts is currently generating about 0.02 per unit of volatility. If you would invest 5,411 in United Parks Resorts on September 4, 2024 and sell it today you would earn a total of 618.00 from holding United Parks Resorts or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. United Parks Resorts
Performance |
| Timeline |
| Air Transport Services |
| United Parks Resorts |
Air Transport and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and United Parks
The main advantage of trading using opposite Air Transport and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, United Parks 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 Parks will offset losses from the drop in United Parks' long position.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| United Parks vs. Hyatt Hotels | United Parks vs. Smart Share Global | United Parks vs. Sweetgreen | United Parks vs. Wyndham Hotels Resorts |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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