Correlation Between United Airlines and Canadian Pacific
Can any of the company-specific risk be diversified away by investing in both United Airlines and Canadian Pacific 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 Canadian Pacific 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 Canadian Pacific Railway, you can compare the effects of market volatilities on United Airlines and Canadian Pacific 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 Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Canadian Pacific.
Diversification Opportunities for United Airlines and Canadian Pacific
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between United and Canadian is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Canadian Pacific Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Pacific Railway 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 Canadian Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Pacific Railway has no effect on the direction of United Airlines i.e., United Airlines and Canadian Pacific go up and down completely randomly.
Pair Corralation between United Airlines and Canadian Pacific
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 2.16 times more return on investment than Canadian Pacific. However, United Airlines is 2.16 times more volatile than Canadian Pacific Railway. It trades about 0.15 of its potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.03 per unit of risk. If you would invest 4,549 in United Airlines Holdings on August 27, 2024 and sell it today you would earn a total of 4,975 from holding United Airlines Holdings or generate 109.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Canadian Pacific Railway
Performance |
| Timeline |
| United Airlines Holdings |
| Canadian Pacific Railway |
United Airlines and Canadian Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Canadian Pacific
The main advantage of trading using opposite United Airlines and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Canadian Pacific 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 Canadian Pacific will offset losses from the drop in Canadian Pacific's long position.| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Spirit Airlines |
| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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