Correlation Between United Airlines and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both United Airlines and Methode Electronics 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 Methode Electronics 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 Methode Electronics, you can compare the effects of market volatilities on United Airlines and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Methode Electronics.
Diversification Opportunities for United Airlines and Methode Electronics
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Methode is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of United Airlines i.e., United Airlines and Methode Electronics go up and down completely randomly.
Pair Corralation between United Airlines and Methode Electronics
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.65 times more return on investment than Methode Electronics. However, United Airlines Holdings is 1.53 times less risky than Methode Electronics. It trades about 0.07 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.04 per unit of risk. If you would invest 4,515 in United Airlines Holdings on October 13, 2024 and sell it today you would earn a total of 5,487 from holding United Airlines Holdings or generate 121.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Methode Electronics
Performance |
| Timeline |
| United Airlines Holdings |
| Methode Electronics |
United Airlines and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Methode Electronics
The main advantage of trading using opposite United Airlines and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| United Airlines vs. LANDSEA GREEN MANAGEMENT | United Airlines vs. Coor Service Management | United Airlines vs. COFCO Joycome Foods | United Airlines vs. AGF Management Limited |
| Methode Electronics vs. Molina Healthcare | Methode Electronics vs. US Physical Therapy | Methode Electronics vs. X FAB Silicon Foundries | Methode Electronics vs. TRI CHEMICAL LABORATINC |
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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