Correlation Between United Airlines and Golden Metal

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

Diversification Opportunities for United Airlines and Golden Metal

-0.18

Correlation Coefficient

United Airlines  Golden Metal

Good diversification

The 3 months correlation between United and Golden is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Golden Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Metal Resources 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 Golden Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Metal Resources has no effect on the direction of United Airlines i.e., United Airlines and Golden Metal go up and down completely randomly.

Pair Corralation between United Airlines and Golden Metal

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.61 times more return on investment than Golden Metal. However, United Airlines Holdings is 1.63 times less risky than Golden Metal. It trades about 0.46 of its potential returns per unit of risk. Golden Metal Resources is currently generating about -0.01 per unit of risk. If you would invest  4,352  in United Airlines Holdings on September 1, 2024 and sell it today you would earn a total of  5,288  from holding United Airlines Holdings or generate 121.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Airlines Holdings  vs.  Golden Metal Resources

United Airlines Holdings

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 36 (%) 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.

Golden Metal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Metal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Metal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Airlines and Golden Metal

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

The idea behind United Airlines Holdings and Golden Metal Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.