Correlation Between United Airlines and United States
Can any of the company-specific risk be diversified away by investing in both United Airlines and United States 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 United States 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 United States Steel, you can compare the effects of market volatilities on United Airlines and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and United States.
Diversification Opportunities for United Airlines and United States
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and United is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of United Airlines i.e., United Airlines and United States go up and down completely randomly.
Pair Corralation between United Airlines and United States
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.63 times more return on investment than United States. However, United Airlines Holdings is 1.58 times less risky than United States. It trades about 0.56 of its potential returns per unit of risk. United States Steel is currently generating about 0.12 per unit of risk. If you would invest 145,000 in United Airlines Holdings on August 24, 2024 and sell it today you would earn a total of 48,000 from holding United Airlines Holdings or generate 33.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Airlines Holdings vs. United States Steel
Performance |
| Timeline |
| United Airlines Holdings |
| United States Steel |
United Airlines and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and United States
The main advantage of trading using opposite United Airlines and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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