Correlation Between SINGAPORE AIRLINES and United Airlines

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

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

Diversification Opportunities for SINGAPORE AIRLINES and United Airlines

0.46

Correlation Coefficient

SINGAPORE AIRLINES  United Airlines

Very weak diversification

The 3 months correlation between SINGAPORE and United is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and United Airlines go up and down completely randomly.

Pair Corralation between SINGAPORE AIRLINES and United Airlines

Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to generate 17.71 times less return on investment than United Airlines. But when comparing it to its historical volatility, SINGAPORE AIRLINES is 3.3 times less risky than United Airlines. It trades about 0.05 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,026  in United Airlines Holdings on October 20, 2024 and sell it today you would earn a total of  1,174  from holding United Airlines Holdings or generate 13.01% return on investment over 90 days.

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

SINGAPORE AIRLINES  vs.  United Airlines Holdings

SINGAPORE AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SINGAPORE AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SINGAPORE AIRLINES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

United Airlines Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 18 (%) 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 SINGAPORE AIRLINES and United Airlines

The main advantage of trading using opposite SINGAPORE AIRLINES and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.