Correlation Between Wayside Technology and United Airlines

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

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

Diversification Opportunities for Wayside Technology and United Airlines

0.94

Correlation Coefficient

Wayside Technology  United Airlines

Almost no diversification

The 3 months correlation between Wayside and United is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group 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 Wayside Technology 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 Wayside Technology Group 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 Wayside Technology i.e., Wayside Technology and United Airlines go up and down completely randomly.

Pair Corralation between Wayside Technology and United Airlines

Assuming the 90 days horizon Wayside Technology is expected to generate 1.7 times less return on investment than United Airlines. In addition to that, Wayside Technology is 1.23 times more volatile than United Airlines Holdings. It trades about 0.07 of its total potential returns per unit of risk. United Airlines Holdings is currently generating about 0.15 per unit of volatility. If you would invest  7,988  in United Airlines Holdings on October 8, 2024 and sell it today you would earn a total of  1,178  from holding United Airlines Holdings or generate 14.75% return on investment over 90 days.

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

Wayside Technology Group  vs.  United Airlines Holdings

Wayside Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported 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 nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayside Technology and United Airlines

The main advantage of trading using opposite Wayside Technology and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayside Technology 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 Wayside Technology Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.