Correlation Between JetBlue Airways and United Airlines

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

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

Diversification Opportunities for JetBlue Airways and United Airlines

0.38

Correlation Coefficient

JetBlue Airways  United Airlines

Weak diversification

The 3 months correlation between JetBlue and United is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp 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 JetBlue Airways 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 JetBlue Airways Corp 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 JetBlue Airways i.e., JetBlue Airways and United Airlines go up and down completely randomly.

Pair Corralation between JetBlue Airways and United Airlines

Given the investment horizon of 90 days JetBlue Airways is expected to generate 3.43 times less return on investment than United Airlines. In addition to that, JetBlue Airways is 1.65 times more volatile than United Airlines Holdings. It trades about 0.08 of its total potential returns per unit of risk. United Airlines Holdings is currently generating about 0.47 per unit of volatility. If you would invest  4,387  in United Airlines Holdings on August 31, 2024 and sell it today you would earn a total of  5,248  from holding United Airlines Holdings or generate 119.63% return on investment over 90 days.

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

JetBlue Airways Corp  vs.  United Airlines Holdings

JetBlue Airways Corp

Risk-Adjusted Performance

6 of 100

Modest

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

United Airlines Holdings

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 36 (%) 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 JetBlue Airways and United Airlines

The main advantage of trading using opposite JetBlue Airways and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways 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 JetBlue Airways Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.