Correlation Between WPP - and United Airlines

Can any of the company-specific risk be diversified away by investing in both WPP - 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 WPP - and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WPP Dusseldorf and United Airlines Holdings, you can compare the effects of market volatilities on WPP - 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 WPP - with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP - and United Airlines.

Diversification Opportunities for WPP - and United Airlines

0.47

Correlation Coefficient

WPP -  United Airlines

Very weak diversification

The 3 months correlation between WPP and United is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding WPP Dusseldorf 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 WPP - 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 WPP Dusseldorf 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 WPP - i.e., WPP - and United Airlines go up and down completely randomly.

Pair Corralation between WPP - and United Airlines

Assuming the 90 days trading horizon WPP Dusseldorf is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, WPP Dusseldorf is 1.69 times less risky than United Airlines. The stock trades about -0.23 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  9,026  in United Airlines Holdings on December 19, 2024 and sell it today you would lose (2,267) from holding United Airlines Holdings or give up 25.12% of portfolio value over 90 days.

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

WPP Dusseldorf  vs.  United Airlines Holdings

WPP Dusseldorf

Risk-Adjusted Performance

Very Weak

Over the last 90 days WPP Dusseldorf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United Airlines Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with WPP - and United Airlines

The main advantage of trading using opposite WPP - and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP - 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.

The idea behind WPP Dusseldorf and United Airlines Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.