Correlation Between United Airlines and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both United Airlines and PayPal Holdings 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 PayPal Holdings 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 PayPal Holdings, you can compare the effects of market volatilities on United Airlines and PayPal Holdings 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 PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and PayPal Holdings.
Diversification Opportunities for United Airlines and PayPal Holdings
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and PayPal is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal 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 PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of United Airlines i.e., United Airlines and PayPal Holdings go up and down completely randomly.
Pair Corralation between United Airlines and PayPal Holdings
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.09 times more return on investment than PayPal Holdings. However, United Airlines is 1.09 times more volatile than PayPal Holdings. It trades about 0.09 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.04 per unit of risk. If you would invest 10,913 in United Airlines Holdings on September 3, 2024 and sell it today you would earn a total of 18,301 from holding United Airlines Holdings or generate 167.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
United Airlines Holdings vs. PayPal Holdings
Performance |
| Timeline |
| United Airlines Holdings |
| PayPal Holdings |
United Airlines and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and PayPal Holdings
The main advantage of trading using opposite United Airlines and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, PayPal Holdings 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines Co | United Airlines vs. American Airlines Group | United Airlines vs. Gol Linhas Areas |
| PayPal Holdings vs. American Airlines Group | PayPal Holdings vs. Paycom Software | PayPal Holdings vs. Unity Software | PayPal Holdings vs. United Airlines Holdings |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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