Correlation Between United Airlines and ServiceNow
Can any of the company-specific risk be diversified away by investing in both United Airlines and ServiceNow 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 ServiceNow 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 ServiceNow, you can compare the effects of market volatilities on United Airlines and ServiceNow 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 ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and ServiceNow.
Diversification Opportunities for United Airlines and ServiceNow
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and ServiceNow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of United Airlines i.e., United Airlines and ServiceNow go up and down completely randomly.
Pair Corralation between United Airlines and ServiceNow
Assuming the 90 days trading horizon United Airlines is expected to generate 1.18 times less return on investment than ServiceNow. In addition to that, United Airlines is 1.03 times more volatile than ServiceNow. It trades about 0.08 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.09 per unit of volatility. If you would invest 4,922 in ServiceNow on August 27, 2024 and sell it today you would earn a total of 7,316 from holding ServiceNow or generate 148.64% 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. ServiceNow
Performance |
| Timeline |
| United Airlines Holdings |
| ServiceNow |
United Airlines and ServiceNow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and ServiceNow
The main advantage of trading using opposite United Airlines and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, ServiceNow 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 ServiceNow will offset losses from the drop in ServiceNow'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 |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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