Correlation Between United Airlines and Home Depot
Can any of the company-specific risk be diversified away by investing in both United Airlines and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on United Airlines and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Home Depot.
Diversification Opportunities for United Airlines and Home Depot
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Home is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of United Airlines i.e., United Airlines and Home Depot go up and down completely randomly.
Pair Corralation between United Airlines and Home Depot
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.48 times more return on investment than Home Depot. However, United Airlines is 1.48 times more volatile than The Home Depot. It trades about 0.22 of its potential returns per unit of risk. The Home Depot is currently generating about 0.16 per unit of risk. If you would invest 13,692 in United Airlines Holdings on August 24, 2024 and sell it today you would earn a total of 13,956 from holding United Airlines Holdings or generate 101.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. The Home Depot
Performance |
| Timeline |
| United Airlines Holdings |
| Home Depot |
United Airlines and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Home Depot
The main advantage of trading using opposite United Airlines and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| United Airlines vs. Apartment Investment and | United Airlines vs. Zoom Video Communications | United Airlines vs. Verizon Communications | United Airlines vs. Charter Communications |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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