Correlation Between China Eastern and United Airlines

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

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

Diversification Opportunities for China Eastern and United Airlines

-0.12

Correlation Coefficient

China Eastern  United Airlines

Good diversification

The 3 months correlation between China and United is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines 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 China Eastern 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 China Eastern Airlines 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 China Eastern i.e., China Eastern and United Airlines go up and down completely randomly.

Pair Corralation between China Eastern and United Airlines

Assuming the 90 days trading horizon China Eastern Airlines is expected to generate 0.71 times more return on investment than United Airlines. However, China Eastern Airlines is 1.41 times less risky than United Airlines. It trades about 0.03 of its potential returns per unit of risk. United Airlines Holdings is currently generating about -0.14 per unit of risk. If you would invest  30.00  in China Eastern Airlines on December 20, 2024 and sell it today you would earn a total of  1.00  from holding China Eastern Airlines or generate 3.33% return on investment over 90 days.

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

China Eastern Airlines  vs.  United Airlines Holdings

China Eastern Airlines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Eastern is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 China Eastern and United Airlines

The main advantage of trading using opposite China Eastern and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern 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 China Eastern Airlines 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.