Correlation Between United Airlines and Alfa Holdings

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

Diversification Opportunities for United Airlines and Alfa Holdings

0.57

Correlation Coefficient

United Airlines  Alfa Holdings

Very weak diversification

The 3 months correlation between United and Alfa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Alfa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Holdings SA 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 Alfa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Holdings SA has no effect on the direction of United Airlines i.e., United Airlines and Alfa Holdings go up and down completely randomly.

Pair Corralation between United Airlines and Alfa Holdings

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.45 times more return on investment than Alfa Holdings. However, United Airlines Holdings is 2.22 times less risky than Alfa Holdings. It trades about 0.3 of its potential returns per unit of risk. Alfa Holdings SA is currently generating about 0.01 per unit of risk. If you would invest  21,105  in United Airlines Holdings on October 25, 2024 and sell it today you would earn a total of  11,182  from holding United Airlines Holdings or generate 52.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

United Airlines Holdings  vs.  Alfa Holdings SA

United Airlines Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 23 (%) 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.

Alfa Holdings SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Holdings SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Airlines and Alfa Holdings

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

The idea behind United Airlines Holdings and Alfa Holdings SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.