Correlation Between Tower Semiconductor and United Airlines
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor 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 Tower Semiconductor and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and United Airlines Holdings, you can compare the effects of market volatilities on Tower Semiconductor 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 Tower Semiconductor with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and United Airlines.
Diversification Opportunities for Tower Semiconductor and United Airlines
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tower and United is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and United Airlines go up and down completely randomly.
Pair Corralation between Tower Semiconductor and United Airlines
Assuming the 90 days horizon Tower Semiconductor is expected to generate 1.59 times less return on investment than United Airlines. But when comparing it to its historical volatility, Tower Semiconductor is 1.08 times less risky than United Airlines. It trades about 0.09 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 3,982 in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of 5,314 from holding United Airlines Holdings or generate 133.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. United Airlines Holdings
Performance |
| Timeline |
| Tower Semiconductor |
| United Airlines Holdings |
Tower Semiconductor and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and United Airlines
The main advantage of trading using opposite Tower Semiconductor and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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.| Tower Semiconductor vs. Taiwan Semiconductor Manufacturing | Tower Semiconductor vs. Broadcom | Tower Semiconductor vs. Superior Plus Corp | Tower Semiconductor vs. SIVERS SEMICONDUCTORS AB |
| United Airlines vs. Zijin Mining Group | United Airlines vs. Highlight Communications AG | United Airlines vs. Grupo Carso SAB | United Airlines vs. GEELY AUTOMOBILE |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |