Correlation Between United Airlines and FedEx
Can any of the company-specific risk be diversified away by investing in both United Airlines and FedEx 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 FedEx 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 FedEx, you can compare the effects of market volatilities on United Airlines and FedEx 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 FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and FedEx.
Diversification Opportunities for United Airlines and FedEx
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and FedEx is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of United Airlines i.e., United Airlines and FedEx go up and down completely randomly.
Pair Corralation between United Airlines and FedEx
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.83 times more return on investment than FedEx. However, United Airlines is 1.83 times more volatile than FedEx. It trades about 0.41 of its potential returns per unit of risk. FedEx is currently generating about 0.33 per unit of risk. If you would invest 158,500 in United Airlines Holdings on September 1, 2024 and sell it today you would earn a total of 38,300 from holding United Airlines Holdings or generate 24.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. FedEx
Performance |
| Timeline |
| United Airlines Holdings |
| FedEx |
United Airlines and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and FedEx
The main advantage of trading using opposite United Airlines and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.| United Airlines vs. The Select Sector | United Airlines vs. Promotora y Operadora | United Airlines vs. SPDR Series Trust | United Airlines vs. iShares Trust |
| FedEx vs. Genworth Financial | FedEx vs. Grupo Sports World | FedEx vs. Capital One Financial | FedEx vs. Monster Beverage Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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