Correlation Between PREMIER FOODS and United Airlines
Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS 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 PREMIER FOODS and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PREMIER FOODS and United Airlines Holdings, you can compare the effects of market volatilities on PREMIER FOODS 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 PREMIER FOODS with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and United Airlines.
Diversification Opportunities for PREMIER FOODS and United Airlines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PREMIER and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS i.e., PREMIER FOODS and United Airlines go up and down completely randomly.
Pair Corralation between PREMIER FOODS and United Airlines
Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, PREMIER FOODS is 2.21 times less risky than United Airlines. The stock trades about -0.07 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 6,806 in United Airlines Holdings on August 24, 2024 and sell it today you would earn a total of 2,194 from holding United Airlines Holdings or generate 32.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
PREMIER FOODS vs. United Airlines Holdings
Performance |
| Timeline |
| PREMIER FOODS |
| United Airlines Holdings |
PREMIER FOODS and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PREMIER FOODS and United Airlines
The main advantage of trading using opposite PREMIER FOODS and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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.| PREMIER FOODS vs. Sumitomo Rubber Industries | PREMIER FOODS vs. Nufarm Limited | PREMIER FOODS vs. EAGLE MATERIALS | PREMIER FOODS vs. JAPAN TOBACCO UNSPADR12 |
| United Airlines vs. MACOM Technology Solutions | United Airlines vs. PKSHA TECHNOLOGY INC | United Airlines vs. Sunny Optical Technology | United Airlines vs. Microchip Technology Incorporated |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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