Correlation Between United Airlines and Aspen Digital

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

Diversification Opportunities for United Airlines and Aspen Digital

0.56

Correlation Coefficient

United Airlines  Aspen Digital

Very weak diversification

The 3 months correlation between United and Aspen is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Aspen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Digital 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 Aspen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Digital has no effect on the direction of United Airlines i.e., United Airlines and Aspen Digital go up and down completely randomly.

Pair Corralation between United Airlines and Aspen Digital

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 8.21 times more return on investment than Aspen Digital. However, United Airlines is 8.21 times more volatile than Aspen Digital. It trades about 0.39 of its potential returns per unit of risk. Aspen Digital is currently generating about 0.07 per unit of risk. If you would invest  4,965  in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of  4,852  from holding United Airlines Holdings or generate 97.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

United Airlines Holdings  vs.  Aspen Digital

United Airlines Holdings

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aspen Digital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Digital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Aspen Digital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Airlines and Aspen Digital

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

The idea behind United Airlines Holdings and Aspen Digital 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..