Correlation Between United Airlines and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both United Airlines and Highway Holdings 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 Highway Holdings 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 Highway Holdings Limited, you can compare the effects of market volatilities on United Airlines and Highway Holdings 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Highway Holdings.
Diversification Opportunities for United Airlines and Highway Holdings
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Highway is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of United Airlines i.e., United Airlines and Highway Holdings go up and down completely randomly.
Pair Corralation between United Airlines and Highway Holdings
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 3.37 times more return on investment than Highway Holdings. However, United Airlines is 3.37 times more volatile than Highway Holdings Limited. It trades about 0.36 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.06 per unit of risk. If you would invest 7,693 in United Airlines Holdings on August 30, 2024 and sell it today you would earn a total of 1,942 from holding United Airlines Holdings or generate 25.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Highway Holdings Limited
Performance |
| Timeline |
| United Airlines Holdings |
| Highway Holdings |
United Airlines and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Highway Holdings
The main advantage of trading using opposite United Airlines and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.The idea behind United Airlines Holdings and Highway Holdings Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Highway Holdings vs. Northwest Pipe | Highway Holdings vs. Haynes International | Highway Holdings vs. Mayville Engineering Co | Highway Holdings vs. Ryerson Holding Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |