Correlation Between United Airlines and Uber Technologies

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

Diversification Opportunities for United Airlines and Uber Technologies

-0.44

Correlation Coefficient

United Airlines  Uber Technologies

Very good diversification

The 3 months correlation between United and Uber is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of United Airlines i.e., United Airlines and Uber Technologies go up and down completely randomly.

Pair Corralation between United Airlines and Uber Technologies

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.97 times more return on investment than Uber Technologies. However, United Airlines Holdings is 1.03 times less risky than Uber Technologies. It trades about 0.09 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.09 per unit of risk. If you would invest  11,500  in United Airlines Holdings on September 29, 2024 and sell it today you would earn a total of  19,210  from holding United Airlines Holdings or generate 167.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

United Airlines Holdings  vs.  Uber Technologies

United Airlines Holdings

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 28 (%) 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.

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Uber Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Airlines and Uber Technologies

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

The idea behind United Airlines Holdings and Uber Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.