Correlation Between United Airlines and Nufarm
Can any of the company-specific risk be diversified away by investing in both United Airlines and Nufarm 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 Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on United Airlines and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Nufarm.
Diversification Opportunities for United Airlines and Nufarm
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Nufarm is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of United Airlines i.e., United Airlines and Nufarm go up and down completely randomly.
Pair Corralation between United Airlines and Nufarm
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.51 times more return on investment than Nufarm. However, United Airlines is 1.51 times more volatile than Nufarm Limited. It trades about 0.35 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.01 per unit of risk. If you would invest 7,177 in United Airlines Holdings on September 2, 2024 and sell it today you would earn a total of 1,965 from holding United Airlines Holdings or generate 27.38% 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. Nufarm Limited
Performance |
| Timeline |
| United Airlines Holdings |
| Nufarm Limited |
United Airlines and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Nufarm
The main advantage of trading using opposite United Airlines and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| United Airlines vs. Superior Plus Corp | United Airlines vs. NMI Holdings | United Airlines vs. Origin Agritech | United Airlines vs. SIVERS SEMICONDUCTORS AB |
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 CEOs Directory module to screen CEOs from public companies around the world.
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