Correlation Between United Airlines and First Majestic
Can any of the company-specific risk be diversified away by investing in both United Airlines and First Majestic 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 First Majestic 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 First Majestic Silver, you can compare the effects of market volatilities on United Airlines and First Majestic 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 First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and First Majestic.
Diversification Opportunities for United Airlines and First Majestic
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of United Airlines i.e., United Airlines and First Majestic go up and down completely randomly.
Pair Corralation between United Airlines and First Majestic
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 4.14 times more return on investment than First Majestic. However, United Airlines is 4.14 times more volatile than First Majestic Silver. It trades about 0.52 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.24 per unit of risk. If you would invest 146,900 in United Airlines Holdings on August 25, 2024 and sell it today you would earn a total of 45,299 from holding United Airlines Holdings or generate 30.84% 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. First Majestic Silver
Performance |
| Timeline |
| United Airlines Holdings |
| First Majestic Silver |
United Airlines and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and First Majestic
The main advantage of trading using opposite United Airlines and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways | United Airlines vs. Controladora Vuela Compaa |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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