Correlation Between United Airlines and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both United Airlines and Marathon Oil 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 Marathon Oil 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 Marathon Oil, you can compare the effects of market volatilities on United Airlines and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Marathon Oil.
Diversification Opportunities for United Airlines and Marathon Oil
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Marathon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of United Airlines i.e., United Airlines and Marathon Oil go up and down completely randomly.
Pair Corralation between United Airlines and Marathon Oil
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 2.03 times more return on investment than Marathon Oil. However, United Airlines is 2.03 times more volatile than Marathon Oil. It trades about 0.14 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.08 per unit of risk. If you would invest 68,998 in United Airlines Holdings on September 14, 2024 and sell it today you would earn a total of 123,502 from holding United Airlines Holdings or generate 178.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.78% |
| Values | Daily Returns |
United Airlines Holdings vs. Marathon Oil
Performance |
| Timeline |
| United Airlines Holdings |
| Marathon Oil |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
United Airlines and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Marathon Oil
The main advantage of trading using opposite United Airlines and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines | 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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