Correlation Between United Airlines and SoftBank Group

Can any of the company-specific risk be diversified away by investing in both United Airlines and SoftBank Group 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 SoftBank Group 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 SoftBank Group Corp, you can compare the effects of market volatilities on United Airlines and SoftBank Group 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 SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and SoftBank Group.

Diversification Opportunities for United Airlines and SoftBank Group

0.81

Correlation Coefficient

United Airlines  SoftBank Group

Very poor diversification

The 3 months correlation between United and SoftBank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of United Airlines i.e., United Airlines and SoftBank Group go up and down completely randomly.

Pair Corralation between United Airlines and SoftBank Group

Assuming the 90 days trading horizon United Airlines is expected to generate 3.57 times less return on investment than SoftBank Group. In addition to that, United Airlines is 1.3 times more volatile than SoftBank Group Corp. It trades about 0.1 of its total potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.47 per unit of volatility. If you would invest  873,400  in SoftBank Group Corp on September 19, 2024 and sell it today you would earn a total of  110,300  from holding SoftBank Group Corp or generate 12.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	63.64%
Values	Daily Returns

United Airlines Holdings  vs.  SoftBank Group Corp

United Airlines Holdings

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Airlines unveiled solid returns over the last few months and may actually be approaching a breakup point.

SoftBank Group Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SoftBank Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and SoftBank Group

The main advantage of trading using opposite United Airlines and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, SoftBank Group 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 SoftBank Group will offset losses from the drop in SoftBank Group's long position.

The idea behind United Airlines Holdings and SoftBank Group Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.