Correlation Between United Airlines and Snowflake
Can any of the company-specific risk be diversified away by investing in both United Airlines and Snowflake 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 Snowflake 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 Snowflake, you can compare the effects of market volatilities on United Airlines and Snowflake 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 Snowflake. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Snowflake.
Diversification Opportunities for United Airlines and Snowflake
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Snowflake is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake 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 Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of United Airlines i.e., United Airlines and Snowflake go up and down completely randomly.
Pair Corralation between United Airlines and Snowflake
Assuming the 90 days trading horizon United Airlines is expected to generate 3.15 times less return on investment than Snowflake. But when comparing it to its historical volatility, United Airlines Holdings is 3.77 times less risky than Snowflake. It trades about 0.32 of its potential returns per unit of risk. Snowflake is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,764 in Snowflake on September 12, 2024 and sell it today you would earn a total of 795.00 from holding Snowflake or generate 45.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
United Airlines Holdings vs. Snowflake
Performance |
| Timeline |
| United Airlines Holdings |
| Snowflake |
United Airlines and Snowflake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Snowflake
The main advantage of trading using opposite United Airlines and Snowflake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Snowflake 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 Snowflake will offset losses from the drop in Snowflake's long position.| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines Co | United Airlines vs. American Airlines 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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