Correlation Between Visa and United Airlines
Can any of the company-specific risk be diversified away by investing in both Visa and United Airlines 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 Visa and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and United Airlines Holdings, you can compare the effects of market volatilities on Visa and United Airlines 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 Visa with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and United Airlines.
Diversification Opportunities for Visa and United Airlines
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and United is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings and Visa 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 Visa Class A are associated (or correlated) with United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Visa i.e., Visa and United Airlines go up and down completely randomly.
Pair Corralation between Visa and United Airlines
Taking into account the 90-day investment horizon Visa is expected to generate 14.96 times less return on investment than United Airlines. But when comparing it to its historical volatility, Visa Class A is 2.71 times less risky than United Airlines. It trades about 0.04 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 9,713 in United Airlines Holdings on October 21, 2024 and sell it today you would earn a total of 1,013 from holding United Airlines Holdings or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Visa Class A vs. United Airlines Holdings
Performance |
| Timeline |
| Visa Class A |
| United Airlines Holdings |
Visa and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and United Airlines
The main advantage of trading using opposite Visa and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| United Airlines vs. Vitec Software Group | United Airlines vs. Axway Software SA | United Airlines vs. Virgin Wines UK | United Airlines vs. Cognizant Technology Solutions |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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