Correlation Between United Airlines and Orient Overseas
Can any of the company-specific risk be diversified away by investing in both United Airlines and Orient Overseas 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 Orient Overseas 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 Orient Overseas Limited, you can compare the effects of market volatilities on United Airlines and Orient Overseas 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 Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Orient Overseas.
Diversification Opportunities for United Airlines and Orient Overseas
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Orient is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas 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 Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas has no effect on the direction of United Airlines i.e., United Airlines and Orient Overseas go up and down completely randomly.
Pair Corralation between United Airlines and Orient Overseas
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 0.65 times more return on investment than Orient Overseas. However, United Airlines Holdings is 1.55 times less risky than Orient Overseas. It trades about 0.07 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about -0.01 per unit of risk. If you would invest 5,657 in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of 3,996 from holding United Airlines Holdings or generate 70.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 56.25% |
| Values | Daily Returns |
United Airlines Holdings vs. Orient Overseas Limited
Performance |
| Timeline |
| United Airlines Holdings |
| Orient Overseas |
United Airlines and Orient Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Orient Overseas
The main advantage of trading using opposite United Airlines and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Orient Overseas 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 Orient Overseas will offset losses from the drop in Orient Overseas' 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 |
| Orient Overseas vs. Copa Holdings SA | Orient Overseas vs. United Airlines Holdings | Orient Overseas vs. Delta Air Lines | Orient Overseas vs. SkyWest |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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