Correlation Between Endesa SA and United Airlines

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

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

Diversification Opportunities for Endesa SA and United Airlines

-0.31

Correlation Coefficient

Endesa SA  United Airlines

Very good diversification

The 3 months correlation between Endesa and United is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA 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 Endesa SA 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 Endesa SA 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 Endesa SA i.e., Endesa SA and United Airlines go up and down completely randomly.

Pair Corralation between Endesa SA and United Airlines

Assuming the 90 days trading horizon Endesa SA is expected to generate 0.29 times more return on investment than United Airlines. However, Endesa SA is 3.41 times less risky than United Airlines. It trades about 0.2 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  1,987  in Endesa SA on December 21, 2024 and sell it today you would earn a total of  270.00  from holding Endesa SA or generate 13.59% return on investment over 90 days.

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

Endesa SA  vs.  United Airlines Holdings

Endesa SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Endesa SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Endesa SA and United Airlines

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

Check out your portfolio center.

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.