Correlation Between Grand Canyon and United Airlines

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Can any of the company-specific risk be diversified away by investing in both Grand Canyon 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 Grand Canyon and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Canyon Education and United Airlines Holdings, you can compare the effects of market volatilities on Grand Canyon 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 Grand Canyon with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Canyon and United Airlines.

Diversification Opportunities for Grand Canyon and United Airlines

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Grand and United is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education 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 Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and United Airlines go up and down completely randomly.

Pair Corralation between Grand Canyon and United Airlines

Assuming the 90 days trading horizon Grand Canyon is expected to generate 2.29 times less return on investment than United Airlines. But when comparing it to its historical volatility, Grand Canyon Education is 1.56 times less risky than United Airlines. It trades about 0.06 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,923  in United Airlines Holdings on September 29, 2024 and sell it today you would earn a total of  5,674  from holding United Airlines Holdings or generate 144.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Grand Canyon Education  vs.  United Airlines Holdings

 Performance 
       Timeline  
Grand Canyon Education 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.
United Airlines Holdings 

Risk-Adjusted Performance

27 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Grand Canyon and United Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grand Canyon and United Airlines

The main advantage of trading using opposite Grand Canyon and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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