Correlation Between United Airlines and American Eagle
Can any of the company-specific risk be diversified away by investing in both United Airlines and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on United Airlines and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and American Eagle.
Diversification Opportunities for United Airlines and American Eagle
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and American is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of United Airlines i.e., United Airlines and American Eagle go up and down completely randomly.
Pair Corralation between United Airlines and American Eagle
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.05 times more return on investment than American Eagle. However, United Airlines is 1.05 times more volatile than American Eagle Outfitters. It trades about 0.11 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.01 per unit of risk. If you would invest 3,525 in United Airlines Holdings on November 28, 2024 and sell it today you would earn a total of 5,463 from holding United Airlines Holdings or generate 154.98% 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. American Eagle Outfitters
Performance |
| Timeline |
| United Airlines Holdings |
| American Eagle Outfitters |
United Airlines and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and American Eagle
The main advantage of trading using opposite United Airlines and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| United Airlines vs. SYSTEMAIR AB | United Airlines vs. Pets at Home | United Airlines vs. Hisense Home Appliances | United Airlines vs. alstria office REIT AG |
| American Eagle vs. ALERION CLEANPOWER | American Eagle vs. SBI Insurance Group | American Eagle vs. VIENNA INSURANCE GR | American Eagle vs. Yanzhou Coal Mining |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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