Correlation Between ETFS Coffee and United Airlines
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and United Airlines Holdings, you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and United Airlines.
Diversification Opportunities for ETFS Coffee and United Airlines
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and United is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC 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 ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and United Airlines go up and down completely randomly.
Pair Corralation between ETFS Coffee and United Airlines
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 1.19 times more return on investment than United Airlines. However, ETFS Coffee is 1.19 times more volatile than United Airlines Holdings. It trades about 0.32 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.17 per unit of risk. If you would invest 4,131 in ETFS Coffee ETC on September 13, 2024 and sell it today you would earn a total of 1,108 from holding ETFS Coffee ETC or generate 26.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETFS Coffee ETC vs. United Airlines Holdings
Performance |
| Timeline |
| ETFS Coffee ETC |
| United Airlines Holdings |
ETFS Coffee and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and United Airlines
The main advantage of trading using opposite ETFS Coffee and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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.| ETFS Coffee vs. BW OFFSHORE LTD | ETFS Coffee vs. AM EAGLE OUTFITTERS | ETFS Coffee vs. Ramsay Health Care | ETFS Coffee vs. ATRYS HEALTH SA |
| United Airlines vs. RYANAIR HLDGS ADR | United Airlines vs. Ryanair Holdings plc | United Airlines vs. Superior Plus Corp | 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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