Correlation Between United Airlines and Bread Financial
Can any of the company-specific risk be diversified away by investing in both United Airlines and Bread Financial 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 United Airlines and Bread Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Airlines Holdings and Bread Financial Holdings, you can compare the effects of market volatilities on United Airlines and Bread Financial 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 United Airlines with a short position of Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Bread Financial.
Diversification Opportunities for United Airlines and Bread Financial
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Bread is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings and United Airlines 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 United Airlines Holdings are associated (or correlated) with Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of United Airlines i.e., United Airlines and Bread Financial go up and down completely randomly.
Pair Corralation between United Airlines and Bread Financial
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.62 times more return on investment than Bread Financial. However, United Airlines Holdings is 1.62 times less risky than Bread Financial. It trades about 0.4 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.16 per unit of risk. If you would invest 22,214 in United Airlines Holdings on August 27, 2024 and sell it today you would earn a total of 5,461 from holding United Airlines Holdings or generate 24.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Bread Financial Holdings
Performance |
| Timeline |
| United Airlines Holdings |
| Bread Financial Holdings |
United Airlines and Bread Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Bread Financial
The main advantage of trading using opposite United Airlines and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Bread Financial 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 Bread Financial will offset losses from the drop in Bread Financial's long position.| United Airlines vs. Bread Financial Holdings | United Airlines vs. The Bank of | United Airlines vs. Deutsche Bank Aktiengesellschaft | United Airlines vs. TAL Education Group |
| Bread Financial vs. Capital One Financial | Bread Financial vs. Fras le SA | Bread Financial vs. Clave Indices De | Bread Financial vs. BTG Pactual Logstica |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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