Correlation Between Enlight Renewable and United Airlines

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

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

Diversification Opportunities for Enlight Renewable and United Airlines

0.48

Correlation Coefficient

Enlight Renewable  United Airlines

Very weak diversification

The 3 months correlation between Enlight and United is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy 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 Enlight Renewable 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 Enlight Renewable Energy 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 Enlight Renewable i.e., Enlight Renewable and United Airlines go up and down completely randomly.

Pair Corralation between Enlight Renewable and United Airlines

Given the investment horizon of 90 days Enlight Renewable is expected to generate 7.24 times less return on investment than United Airlines. But when comparing it to its historical volatility, Enlight Renewable Energy is 1.13 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 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,180  in United Airlines Holdings on October 9, 2024 and sell it today you would earn a total of  5,941  from holding United Airlines Holdings or generate 142.13% return on investment over 90 days.

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

Enlight Renewable Energy  vs.  United Airlines Holdings

Enlight Renewable Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Enlight Renewable unveiled solid returns over the last few months and may actually be approaching a breakup point.

United Airlines Holdings

Risk-Adjusted Performance

24 of 100

Solid

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. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enlight Renewable and United Airlines

The main advantage of trading using opposite Enlight Renewable and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enlight Renewable 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 Enlight Renewable Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.