Correlation Between United Airlines and Meta Platforms

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

Diversification Opportunities for United Airlines and Meta Platforms

0.72

Correlation Coefficient

United Airlines  Meta Platforms

Poor diversification

The 3 months correlation between United and Meta is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of United Airlines i.e., United Airlines and Meta Platforms go up and down completely randomly.

Pair Corralation between United Airlines and Meta Platforms

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.79 times more return on investment than Meta Platforms. However, United Airlines is 1.79 times more volatile than Meta Platforms. It trades about 0.32 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.08 per unit of risk. If you would invest  112,499  in United Airlines Holdings on September 30, 2024 and sell it today you would earn a total of  88,501  from holding United Airlines Holdings or generate 78.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

United Airlines Holdings  vs.  Meta Platforms

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.

Meta Platforms

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Meta Platforms may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Airlines and Meta Platforms

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

The idea behind United Airlines Holdings and Meta Platforms 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.