Correlation Between United Airlines and Toro

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

Diversification Opportunities for United Airlines and Toro

-0.77

Correlation Coefficient

United Airlines  Toro

Pay attention - limited upside

The 3 months correlation between United and Toro is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Toro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro 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 Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of United Airlines i.e., United Airlines and Toro go up and down completely randomly.

Pair Corralation between United Airlines and Toro

Considering the 90-day investment horizon United Airlines is expected to generate 3.69 times less return on investment than Toro. But when comparing it to its historical volatility, United Airlines Holdings is 3.22 times less risky than Toro. It trades about 0.17 of its potential returns per unit of risk. Toro is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Toro on October 11, 2024 and sell it today you would earn a total of  67.00  from holding Toro or generate 27.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

United Airlines Holdings  vs.  Toro

United Airlines Holdings

Risk-Adjusted Performance

25 of 100

Strong

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. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Toro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Airlines and Toro

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

The idea behind United Airlines Holdings and Toro 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.