Correlation Between United Airlines and Netflix

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

Diversification Opportunities for United Airlines and Netflix

0.95

Correlation Coefficient

United Airlines  Netflix

Almost no diversification

The 3 months correlation between United and Netflix is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of United Airlines i.e., United Airlines and Netflix go up and down completely randomly.

Pair Corralation between United Airlines and Netflix

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.56 times more return on investment than Netflix. However, United Airlines is 1.56 times more volatile than Netflix. It trades about 0.36 of its potential returns per unit of risk. Netflix is currently generating about 0.26 per unit of risk. If you would invest  98,549  in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of  98,451  from holding United Airlines Holdings or generate 99.9% return on investment over 90 days.

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

United Airlines Holdings  vs.  Netflix

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. 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.

Netflix

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Netflix

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

The idea behind United Airlines Holdings and Netflix 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.