Correlation Between United Airlines and International Business

Can any of the company-specific risk be diversified away by investing in both United Airlines and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on United Airlines and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and International Business.

Diversification Opportunities for United Airlines and International Business

-0.31

Correlation Coefficient

United Airlines  International Business

Very good diversification

The 3 months correlation between United and International is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of United Airlines i.e., United Airlines and International Business go up and down completely randomly.

Pair Corralation between United Airlines and International Business

Assuming the 90 days trading horizon United Airlines Holdings is expected to under-perform the International Business. In addition to that, United Airlines is 1.31 times more volatile than International Business Machines. It trades about -0.17 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.04 per unit of volatility. If you would invest  137,920  in International Business Machines on December 27, 2024 and sell it today you would earn a total of  6,636  from holding International Business Machines or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

United Airlines Holdings  vs.  International Business Machine

United Airlines Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

International Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Airlines and International Business

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

The idea behind United Airlines Holdings and International Business Machines 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.