Correlation Between United Airlines and Morgan Advanced

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

Diversification Opportunities for United Airlines and Morgan Advanced

-0.35

Correlation Coefficient

United Airlines  Morgan Advanced

Very good diversification

The 3 months correlation between United and Morgan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of United Airlines i.e., United Airlines and Morgan Advanced go up and down completely randomly.

Pair Corralation between United Airlines and Morgan Advanced

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 2.19 times more return on investment than Morgan Advanced. However, United Airlines is 2.19 times more volatile than Morgan Advanced Materials. It trades about 0.36 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.03 per unit of risk. If you would invest  5,125  in United Airlines Holdings on September 14, 2024 and sell it today you would earn a total of  4,608  from holding United Airlines Holdings or generate 89.91% 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.  Morgan Advanced Materials

United Airlines Holdings

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 28 (%) 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.

Morgan Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Morgan Advanced 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 Morgan Advanced

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

The idea behind United Airlines Holdings and Morgan Advanced Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.