Correlation Between United Airlines and General Dynamics

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

Diversification Opportunities for United Airlines and General Dynamics

-0.32

Correlation Coefficient

United Airlines  General Dynamics

Very good diversification

The 3 months correlation between United and General is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of United Airlines i.e., United Airlines and General Dynamics go up and down completely randomly.

Pair Corralation between United Airlines and General Dynamics

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 3.01 times more return on investment than General Dynamics. However, United Airlines is 3.01 times more volatile than General Dynamics. It trades about 0.31 of its potential returns per unit of risk. General Dynamics is currently generating about -0.14 per unit of risk. If you would invest  106,900  in United Airlines Holdings on September 25, 2024 and sell it today you would earn a total of  85,100  from holding United Airlines Holdings or generate 79.61% return on investment over 90 days.

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

United Airlines Holdings  vs.  General Dynamics

United Airlines Holdings

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 24 (%) 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.

General Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with United Airlines and General Dynamics

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

The idea behind United Airlines Holdings and General Dynamics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..