Correlation Between United Airlines and Disney

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

Diversification Opportunities for United Airlines and Disney

0.93

Correlation Coefficient

United Airlines  Disney

Almost no diversification

The 3 months correlation between United and Disney is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of United Airlines i.e., United Airlines and Disney go up and down completely randomly.

Pair Corralation between United Airlines and Disney

Assuming the 90 days trading horizon United Airlines is expected to generate 1.04 times less return on investment than Disney. In addition to that, United Airlines is 2.33 times more volatile than The Walt Disney. It trades about 0.03 of its total potential returns per unit of risk. The Walt Disney is currently generating about 0.08 per unit of volatility. If you would invest  223,807  in The Walt Disney on September 19, 2024 and sell it today you would earn a total of  4,042  from holding The Walt Disney or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

United Airlines Holdings  vs.  The Walt Disney

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. In spite of fairly weak essential indicators, United Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Walt Disney

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Disney

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

The idea behind United Airlines Holdings and The Walt Disney 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.