Correlation Between American Express and United Airlines
Can any of the company-specific risk be diversified away by investing in both American Express 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 Express 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 Express and United Airlines Holdings, you can compare the effects of market volatilities on American Express 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 Express with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and United Airlines.
Diversification Opportunities for American Express and United Airlines
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and United is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Express 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 Express 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 Express 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 Express i.e., American Express and United Airlines go up and down completely randomly.
Pair Corralation between American Express and United Airlines
Assuming the 90 days trading horizon American Express is expected to generate 1.69 times less return on investment than United Airlines. But when comparing it to its historical volatility, American Express is 1.64 times less risky than United Airlines. It trades about 0.19 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 90,800 in United Airlines Holdings on September 3, 2024 and sell it today you would earn a total of 106,000 from holding United Airlines Holdings or generate 116.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. United Airlines Holdings
Performance |
| Timeline |
| American Express |
| United Airlines Holdings |
American Express and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and United Airlines
The main advantage of trading using opposite American Express and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 Express vs. FIBRA Storage | American Express vs. Southern Copper | American Express vs. KB Home | American Express vs. Monster Beverage Corp |
| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways | United Airlines vs. Controladora Vuela Compaa |
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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