Correlation Between United Airlines and Metals Exploration

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

Diversification Opportunities for United Airlines and Metals Exploration

0.14

Correlation Coefficient

United Airlines  Metals Exploration

Average diversification

The 3 months correlation between United and Metals is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of United Airlines i.e., United Airlines and Metals Exploration go up and down completely randomly.

Pair Corralation between United Airlines and Metals Exploration

Assuming the 90 days trading horizon United Airlines is expected to generate 2.18 times less return on investment than Metals Exploration. In addition to that, United Airlines is 1.03 times more volatile than Metals Exploration Plc. It trades about 0.03 of its total potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.07 per unit of volatility. If you would invest  520.00  in Metals Exploration Plc on October 1, 2024 and sell it today you would earn a total of  15.00  from holding Metals Exploration Plc or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

United Airlines Holdings  vs.  Metals Exploration Plc

United Airlines Holdings

Risk-Adjusted Performance

27 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 27 (%) 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.

Metals Exploration Plc

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Metals Exploration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Airlines and Metals Exploration

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

The idea behind United Airlines Holdings and Metals Exploration Plc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.