Correlation Between United Airlines and McDonalds
Can any of the company-specific risk be diversified away by investing in both United Airlines and McDonalds 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 McDonalds 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 McDonalds, you can compare the effects of market volatilities on United Airlines and McDonalds 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 McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and McDonalds.
Diversification Opportunities for United Airlines and McDonalds
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and McDonalds is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of United Airlines i.e., United Airlines and McDonalds go up and down completely randomly.
Pair Corralation between United Airlines and McDonalds
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 4.55 times more return on investment than McDonalds. However, United Airlines is 4.55 times more volatile than McDonalds. It trades about 0.1 of its potential returns per unit of risk. McDonalds is currently generating about -0.75 per unit of risk. If you would invest 31,020 in United Airlines Holdings on October 25, 2024 and sell it today you would earn a total of 1,267 from holding United Airlines Holdings or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
United Airlines Holdings vs. McDonalds
Performance |
| Timeline |
| United Airlines Holdings |
| McDonalds |
United Airlines and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and McDonalds
The main advantage of trading using opposite United Airlines and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| United Airlines vs. Delta Air Lines | United Airlines vs. American Airlines Group | United Airlines vs. Alaska Air Group, | United Airlines vs. Gol Linhas Areas |
| McDonalds vs. Truist Financial | McDonalds vs. Unity Software | McDonalds vs. Nordon Indstrias Metalrgicas | McDonalds vs. Paycom Software |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Global Correlations Find global opportunities by holding instruments from different markets |