Correlation Between CME and United Airlines
Can any of the company-specific risk be diversified away by investing in both CME 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 CME and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and United Airlines Holdings, you can compare the effects of market volatilities on CME 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 CME with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and United Airlines.
Diversification Opportunities for CME and United Airlines
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CME and United is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CME 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 CME 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 CME 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 CME i.e., CME and United Airlines go up and down completely randomly.
Pair Corralation between CME and United Airlines
Assuming the 90 days trading horizon CME is expected to generate 5.0 times less return on investment than United Airlines. But when comparing it to its historical volatility, CME Group is 2.5 times less risky than United Airlines. It trades about 0.07 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,795 in United Airlines Holdings on November 5, 2024 and sell it today you would earn a total of 6,511 from holding United Airlines Holdings or generate 171.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CME Group vs. United Airlines Holdings
Performance |
| Timeline |
| CME Group |
| United Airlines Holdings |
CME and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and United Airlines
The main advantage of trading using opposite CME and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME 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.| CME vs. DETALION GAMES SA | CME vs. PLAYMATES TOYS | CME vs. Inspire Medical Systems | CME vs. QINGCI GAMES INC |
| United Airlines vs. TRAVEL LEISURE DL 01 | United Airlines vs. PLAY2CHILL SA ZY | United Airlines vs. MUTUIONLINE | United Airlines vs. PACIFIC ONLINE |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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