Correlation Between United Airlines and Carnival Plc
Can any of the company-specific risk be diversified away by investing in both United Airlines and Carnival Plc 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 Carnival Plc 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 Carnival plc, you can compare the effects of market volatilities on United Airlines and Carnival Plc 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 Carnival Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Carnival Plc.
Diversification Opportunities for United Airlines and Carnival Plc
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between United and Carnival is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc 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 Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival plc has no effect on the direction of United Airlines i.e., United Airlines and Carnival Plc go up and down completely randomly.
Pair Corralation between United Airlines and Carnival Plc
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.12 times more return on investment than Carnival Plc. However, United Airlines is 1.12 times more volatile than Carnival plc. It trades about 0.52 of its potential returns per unit of risk. Carnival plc is currently generating about 0.5 per unit of risk. If you would invest 22,384 in United Airlines Holdings on September 5, 2024 and sell it today you would earn a total of 6,896 from holding United Airlines Holdings or generate 30.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Carnival plc
Performance |
| Timeline |
| United Airlines Holdings |
| Carnival plc |
United Airlines and Carnival Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Carnival Plc
The main advantage of trading using opposite United Airlines and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Carnival Plc 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 Carnival Plc will offset losses from the drop in Carnival Plc's long position.| United Airlines vs. Southwest Airlines Co | United Airlines vs. American Airlines Group | United Airlines vs. Gol Linhas Areas | United Airlines vs. Azul SA |
| Carnival Plc vs. GP Investments | Carnival Plc vs. Charter Communications | Carnival Plc vs. HDFC Bank Limited | Carnival Plc vs. Deutsche Bank Aktiengesellschaft |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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