Correlation Between United Airlines and Seagate Technology
Can any of the company-specific risk be diversified away by investing in both United Airlines and Seagate Technology 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 Seagate Technology 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 Seagate Technology Holdings, you can compare the effects of market volatilities on United Airlines and Seagate Technology 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 Seagate Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Seagate Technology.
Diversification Opportunities for United Airlines and Seagate Technology
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Seagate is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology 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 Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology has no effect on the direction of United Airlines i.e., United Airlines and Seagate Technology go up and down completely randomly.
Pair Corralation between United Airlines and Seagate Technology
Assuming the 90 days trading horizon United Airlines is expected to generate 1.91 times less return on investment than Seagate Technology. But when comparing it to its historical volatility, United Airlines Holdings is 1.25 times less risky than Seagate Technology. It trades about 0.12 of its potential returns per unit of risk. Seagate Technology Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 54,215 in Seagate Technology Holdings on November 4, 2024 and sell it today you would earn a total of 6,114 from holding Seagate Technology Holdings or generate 11.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Seagate Technology Holdings
Performance |
| Timeline |
| United Airlines Holdings |
| Seagate Technology |
United Airlines and Seagate Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Seagate Technology
The main advantage of trading using opposite United Airlines and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Seagate Technology 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 Seagate Technology will offset losses from the drop in Seagate Technology's 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 |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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