Correlation Between United Airlines and Pershing Square

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

Diversification Opportunities for United Airlines and Pershing Square

0.42

Correlation Coefficient

United Airlines  Pershing Square

Very weak diversification

The 3 months correlation between United and Pershing is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of United Airlines i.e., United Airlines and Pershing Square go up and down completely randomly.

Pair Corralation between United Airlines and Pershing Square

Considering the 90-day investment horizon United Airlines Holdings is expected to under-perform the Pershing Square. In addition to that, United Airlines is 1.96 times more volatile than Pershing Square Holdings. It trades about -0.12 of its total potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.07 per unit of volatility. If you would invest  4,780  in Pershing Square Holdings on December 26, 2024 and sell it today you would earn a total of  310.00  from holding Pershing Square Holdings or generate 6.49% return on investment over 90 days.

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

United Airlines Holdings  vs.  Pershing Square Holdings

United Airlines Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pershing Square Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pershing Square Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pershing Square may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Airlines and Pershing Square

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

The idea behind United Airlines Holdings and Pershing Square Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.