Correlation Between United Airlines and Jefferies Financial

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

Diversification Opportunities for United Airlines and Jefferies Financial

0.88

Correlation Coefficient

United Airlines  Jefferies Financial

Very poor diversification

The 3 months correlation between United and Jefferies is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial 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 Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of United Airlines i.e., United Airlines and Jefferies Financial go up and down completely randomly.

Pair Corralation between United Airlines and Jefferies Financial

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.98 times more return on investment than Jefferies Financial. However, United Airlines Holdings is 1.02 times less risky than Jefferies Financial. It trades about 0.18 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about 0.14 per unit of risk. If you would invest  10,550  in United Airlines Holdings on October 23, 2024 and sell it today you would earn a total of  22,251  from holding United Airlines Holdings or generate 210.91% return on investment over 90 days.

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

United Airlines Holdings  vs.  Jefferies Financial Group

United Airlines Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Jefferies Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Jefferies Financial

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

The idea behind United Airlines Holdings and Jefferies Financial Group 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.