Correlation Between United Airlines and POWR Lithium
Can any of the company-specific risk be diversified away by investing in both United Airlines and POWR Lithium 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 POWR Lithium 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 POWR Lithium Corp, you can compare the effects of market volatilities on United Airlines and POWR Lithium 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 POWR Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and POWR Lithium.
Diversification Opportunities for United Airlines and POWR Lithium
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and POWR is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and POWR Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWR Lithium Corp 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 POWR Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWR Lithium Corp has no effect on the direction of United Airlines i.e., United Airlines and POWR Lithium go up and down completely randomly.
Pair Corralation between United Airlines and POWR Lithium
Considering the 90-day investment horizon United Airlines is expected to generate 6.59 times less return on investment than POWR Lithium. But when comparing it to its historical volatility, United Airlines Holdings is 10.95 times less risky than POWR Lithium. It trades about 0.09 of its potential returns per unit of risk. POWR Lithium Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14.00 in POWR Lithium Corp on September 12, 2024 and sell it today you would lose (9.40) from holding POWR Lithium Corp or give up 67.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
United Airlines Holdings vs. POWR Lithium Corp
Performance |
| Timeline |
| United Airlines Holdings |
| POWR Lithium Corp |
United Airlines and POWR Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and POWR Lithium
The main advantage of trading using opposite United Airlines and POWR Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, POWR Lithium 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 POWR Lithium will offset losses from the drop in POWR Lithium'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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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