Correlation Between North American and United Airlines
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and United Airlines Holdings, you can compare the effects of market volatilities on North American 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 North American with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and United Airlines.
Diversification Opportunities for North American and United Airlines
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and United is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and United Airlines go up and down completely randomly.
Pair Corralation between North American and United Airlines
Assuming the 90 days horizon North American is expected to generate 9.41 times less return on investment than United Airlines. But when comparing it to its historical volatility, North American Construction is 1.76 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 0.35 of returns per unit of risk over similar time horizon. If you would invest 7,177 in United Airlines Holdings on September 2, 2024 and sell it today you would earn a total of 1,965 from holding United Airlines Holdings or generate 27.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. United Airlines Holdings
Performance |
| Timeline |
| North American Const |
| United Airlines Holdings |
North American and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and United Airlines
The main advantage of trading using opposite North American and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech | North American vs. SIVERS SEMICONDUCTORS AB |
| United Airlines vs. Superior Plus Corp | United Airlines vs. NMI Holdings | United Airlines vs. Origin Agritech | United Airlines vs. SIVERS SEMICONDUCTORS AB |
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 Stocks Directory module to find actively traded stocks across global markets.
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