Correlation Between United Airlines and Pacific Basin
Can any of the company-specific risk be diversified away by investing in both United Airlines and Pacific Basin 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 Pacific Basin 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 Pacific Basin Shipping, you can compare the effects of market volatilities on United Airlines and Pacific Basin 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 Pacific Basin. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Pacific Basin.
Diversification Opportunities for United Airlines and Pacific Basin
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Pacific is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping 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 Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of United Airlines i.e., United Airlines and Pacific Basin go up and down completely randomly.
Pair Corralation between United Airlines and Pacific Basin
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 0.84 times more return on investment than Pacific Basin. However, United Airlines Holdings is 1.19 times less risky than Pacific Basin. It trades about 0.15 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about 0.01 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 | Insignificant |
| Accuracy | 79.26% |
| Values | Daily Returns |
United Airlines Holdings vs. Pacific Basin Shipping
Performance |
| Timeline |
| United Airlines Holdings |
| Pacific Basin Shipping |
United Airlines and Pacific Basin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Pacific Basin
The main advantage of trading using opposite United Airlines and Pacific Basin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Pacific Basin 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 Pacific Basin will offset losses from the drop in Pacific Basin'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 |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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