Correlation Between United Airlines and American States
Can any of the company-specific risk be diversified away by investing in both United Airlines and American States 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 States 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 States Water, you can compare the effects of market volatilities on United Airlines and American States 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 States. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and American States.
Diversification Opportunities for United Airlines and American States
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of United Airlines i.e., United Airlines and American States go up and down completely randomly.
Pair Corralation between United Airlines and American States
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.66 times more return on investment than American States. However, United Airlines is 1.66 times more volatile than American States Water. It trades about -0.11 of its potential returns per unit of risk. American States Water is currently generating about -0.21 per unit of risk. If you would invest 9,530 in United Airlines Holdings on October 9, 2024 and sell it today you would lose (364.00) from holding United Airlines Holdings or give up 3.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. American States Water
Performance |
| Timeline |
| United Airlines Holdings |
| American States Water |
United Airlines and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and American States
The main advantage of trading using opposite United Airlines and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, American States 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 States will offset losses from the drop in American States' long position.| United Airlines vs. SYSTEMAIR AB | United Airlines vs. STMICROELECTRONICS | United Airlines vs. RYANAIR HLDGS ADR | United Airlines vs. STMicroelectronics NV |
| American States vs. GOODYEAR T RUBBER | American States vs. Seven West Media | American States vs. PROSIEBENSAT1 MEDIADR4 | American States vs. Compagnie Plastic Omnium |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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