Correlation Between Insurance Australia and United Airlines
Can any of the company-specific risk be diversified away by investing in both Insurance Australia 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 Insurance Australia and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insurance Australia Group and United Airlines Holdings, you can compare the effects of market volatilities on Insurance Australia 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 Insurance Australia with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and United Airlines.
Diversification Opportunities for Insurance Australia and United Airlines
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Insurance and United is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia 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 Insurance Australia 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 Insurance Australia 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 Insurance Australia i.e., Insurance Australia and United Airlines go up and down completely randomly.
Pair Corralation between Insurance Australia and United Airlines
Assuming the 90 days horizon Insurance Australia is expected to generate 1.38 times less return on investment than United Airlines. But when comparing it to its historical volatility, Insurance Australia Group is 2.15 times less risky than United Airlines. It trades about 0.25 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 9,661 in United Airlines Holdings on November 5, 2024 and sell it today you would earn a total of 875.00 from holding United Airlines Holdings or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. United Airlines Holdings
Performance |
| Timeline |
| Insurance Australia |
| United Airlines Holdings |
Insurance Australia and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and United Airlines
The main advantage of trading using opposite Insurance Australia and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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.| Insurance Australia vs. Fortescue Metals Group | Insurance Australia vs. SBM OFFSHORE | Insurance Australia vs. Jacquet Metal Service | Insurance Australia vs. Transport International Holdings |
| United Airlines vs. Geely Automobile Holdings | United Airlines vs. VELA TECHNOLPLC LS 0001 | United Airlines vs. Kingdee International Software | United Airlines vs. ASPEN TECHINC DL |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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