Correlation Between United Airlines and Citigroup

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

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

Diversification Opportunities for United Airlines and Citigroup

0.97

Correlation Coefficient

United Airlines  Citigroup

Almost no diversification

The 3 months correlation between United and Citigroup is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and United 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 United Airlines Holdings are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of United Airlines i.e., United Airlines and Citigroup go up and down completely randomly.

Pair Corralation between United Airlines and Citigroup

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.62 times more return on investment than Citigroup. However, United Airlines is 1.62 times more volatile than Citigroup. It trades about 0.4 of its potential returns per unit of risk. Citigroup is currently generating about 0.26 per unit of risk. If you would invest  14,100  in United Airlines Holdings on September 14, 2024 and sell it today you would earn a total of  15,190  from holding United Airlines Holdings or generate 107.73% return on investment over 90 days.

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

United Airlines Holdings  vs.  Citigroup

United Airlines Holdings

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Citigroup

The main advantage of trading using opposite United Airlines and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.

The idea behind United Airlines Holdings and Citigroup 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..