Correlation Between United Airlines and Transocean
Can any of the company-specific risk be diversified away by investing in both United Airlines and Transocean 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 Transocean 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 Transocean, you can compare the effects of market volatilities on United Airlines and Transocean 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 Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Transocean.
Diversification Opportunities for United Airlines and Transocean
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Transocean is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of United Airlines i.e., United Airlines and Transocean go up and down completely randomly.
Pair Corralation between United Airlines and Transocean
Considering the 90-day investment horizon United Airlines Holdings is expected to generate 0.91 times more return on investment than Transocean. However, United Airlines Holdings is 1.1 times less risky than Transocean. It trades about 0.39 of its potential returns per unit of risk. Transocean is currently generating about 0.04 per unit of risk. If you would invest 7,826 in United Airlines Holdings on September 1, 2024 and sell it today you would earn a total of 1,857 from holding United Airlines Holdings or generate 23.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Transocean
Performance |
| Timeline |
| United Airlines Holdings |
| Transocean |
United Airlines and Transocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Transocean
The main advantage of trading using opposite United Airlines and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Transocean 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 Transocean will offset losses from the drop in Transocean'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 |
| Transocean vs. Borr Drilling | Transocean vs. Patterson UTI Energy | Transocean vs. Noble plc | Transocean vs. Helmerich and Payne |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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