Correlation Between United Airlines and American Airlines
Can any of the company-specific risk be diversified away by investing in both United Airlines and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on United Airlines and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and American Airlines.
Diversification Opportunities for United Airlines and American Airlines
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of United Airlines i.e., United Airlines and American Airlines go up and down completely randomly.
Pair Corralation between United Airlines and American Airlines
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 0.8 times more return on investment than American Airlines. However, United Airlines Holdings is 1.26 times less risky than American Airlines. It trades about 0.26 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.02 per unit of risk. If you would invest 9,710 in United Airlines Holdings on November 1, 2024 and sell it today you would earn a total of 1,116 from holding United Airlines Holdings or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. American Airlines Group
Performance |
| Timeline |
| United Airlines Holdings |
| American Airlines |
United Airlines and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and American Airlines
The main advantage of trading using opposite United Airlines and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Delta Air Lines |
| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines vs. Frontier Group Holdings |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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