Correlation Between United Airlines and GlaxoSmithKline Plc
Can any of the company-specific risk be diversified away by investing in both United Airlines and GlaxoSmithKline Plc 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 GlaxoSmithKline Plc 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 GlaxoSmithKline plc, you can compare the effects of market volatilities on United Airlines and GlaxoSmithKline Plc 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 GlaxoSmithKline Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and GlaxoSmithKline Plc.
Diversification Opportunities for United Airlines and GlaxoSmithKline Plc
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and GlaxoSmithKline is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and GlaxoSmithKline plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline plc 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 GlaxoSmithKline Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline plc has no effect on the direction of United Airlines i.e., United Airlines and GlaxoSmithKline Plc go up and down completely randomly.
Pair Corralation between United Airlines and GlaxoSmithKline Plc
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.56 times more return on investment than GlaxoSmithKline Plc. However, United Airlines is 1.56 times more volatile than GlaxoSmithKline plc. It trades about 0.36 of its potential returns per unit of risk. GlaxoSmithKline plc is currently generating about 0.01 per unit of risk. If you would invest 98,549 in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of 98,451 from holding United Airlines Holdings or generate 99.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
United Airlines Holdings vs. GlaxoSmithKline plc
Performance |
| Timeline |
| United Airlines Holdings |
| GlaxoSmithKline plc |
United Airlines and GlaxoSmithKline Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and GlaxoSmithKline Plc
The main advantage of trading using opposite United Airlines and GlaxoSmithKline Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, GlaxoSmithKline Plc 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 GlaxoSmithKline Plc will offset losses from the drop in GlaxoSmithKline Plc's long position.| United Airlines vs. Verizon Communications | United Airlines vs. KB Home | United Airlines vs. Hoteles City Express | United Airlines vs. Monster Beverage Corp |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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