Correlation Between Western Union and United Airlines
Can any of the company-specific risk be diversified away by investing in both Western Union 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 Western Union and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Union Co and United Airlines Holdings, you can compare the effects of market volatilities on Western Union 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 Western Union with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and United Airlines.
Diversification Opportunities for Western Union and United Airlines
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and United is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Western Union Co 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 Western Union 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 Western Union Co 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 Western Union i.e., Western Union and United Airlines go up and down completely randomly.
Pair Corralation between Western Union and United Airlines
Allowing for the 90-day total investment horizon Western Union Co is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Western Union Co is 2.29 times less risky than United Airlines. The stock trades about -0.08 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 4,133 in United Airlines Holdings on August 28, 2024 and sell it today you would earn a total of 5,550 from holding United Airlines Holdings or generate 134.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Union Co vs. United Airlines Holdings
Performance |
| Timeline |
| Western Union |
| United Airlines Holdings |
Western Union and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and United Airlines
The main advantage of trading using opposite Western Union and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union 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.| Western Union vs. Navient Corp | Western Union vs. Green Dot | Western Union vs. Orix Corp Ads | Western Union vs. FirstCash |
| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Spirit Airlines |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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