Correlation Between United Airlines and Air China

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

Diversification Opportunities for United Airlines and Air China

0.48

Correlation Coefficient

United Airlines  Air China

Very weak diversification

The 3 months correlation between United and Air is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of United Airlines i.e., United Airlines and Air China go up and down completely randomly.

Pair Corralation between United Airlines and Air China

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 1.33 times more return on investment than Air China. However, United Airlines is 1.33 times more volatile than Air China Limited. It trades about 0.02 of its potential returns per unit of risk. Air China Limited is currently generating about -0.31 per unit of risk. If you would invest  9,683  in United Airlines Holdings on November 29, 2024 and sell it today you would earn a total of  57.00  from holding United Airlines Holdings or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.71%
Values	Daily Returns

United Airlines Holdings  vs.  Air China Limited

United Airlines Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, United Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Air China Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Airlines and Air China

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

The idea behind United Airlines Holdings and Air China Limited 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.