Correlation Between Alfa Financial and United Airlines

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

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

Diversification Opportunities for Alfa Financial and United Airlines

0.75

Correlation Coefficient

Alfa Financial  United Airlines

Poor diversification

The 3 months correlation between Alfa and United is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and United Airlines go up and down completely randomly.

Pair Corralation between Alfa Financial and United Airlines

Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Financial Software is 1.3 times less risky than United Airlines. The stock trades about -0.05 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,625  in United Airlines Holdings on October 4, 2024 and sell it today you would earn a total of  28.00  from holding United Airlines Holdings or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Alfa Financial Software  vs.  United Airlines Holdings

Alfa Financial Software

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United Airlines Holdings

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 24 (%) 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.

Pair Trading with Alfa Financial and United Airlines

The main advantage of trading using opposite Alfa Financial and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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 Alfa Financial Software 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.