Correlation Between United Airlines and Charles Schwab

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

Diversification Opportunities for United Airlines and Charles Schwab

0.89

Correlation Coefficient

United Airlines  Charles Schwab

Very poor diversification

The 3 months correlation between United and Charles is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of United Airlines i.e., United Airlines and Charles Schwab go up and down completely randomly.

Pair Corralation between United Airlines and Charles Schwab

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.5 times more return on investment than Charles Schwab. However, United Airlines is 1.5 times more volatile than The Charles Schwab. It trades about 0.32 of its potential returns per unit of risk. The Charles Schwab is currently generating about 0.13 per unit of risk. If you would invest  115,933  in United Airlines Holdings on October 9, 2024 and sell it today you would earn a total of  86,068  from holding United Airlines Holdings or generate 74.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

United Airlines Holdings  vs.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Charles Schwab

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

The idea behind United Airlines Holdings and The Charles Schwab 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.