Correlation Between United Airlines and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both United Airlines and Pearson PLC 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 Pearson PLC 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 Pearson PLC ADR, you can compare the effects of market volatilities on United Airlines and Pearson PLC 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 Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Pearson PLC.
Diversification Opportunities for United Airlines and Pearson PLC
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Pearson is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of United Airlines i.e., United Airlines and Pearson PLC go up and down completely randomly.
Pair Corralation between United Airlines and Pearson PLC
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 2.33 times more return on investment than Pearson PLC. However, United Airlines is 2.33 times more volatile than Pearson PLC ADR. It trades about 0.34 of its potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.21 per unit of risk. If you would invest 8,046 in United Airlines Holdings on September 2, 2024 and sell it today you would earn a total of 1,637 from holding United Airlines Holdings or generate 20.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Pearson PLC ADR
Performance |
| Timeline |
| United Airlines Holdings |
| Pearson PLC ADR |
United Airlines and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Pearson PLC
The main advantage of trading using opposite United Airlines and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Pearson PLC 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 Pearson PLC will offset losses from the drop in Pearson PLC's 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 |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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