Correlation Between United Airlines and Five Below

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

Diversification Opportunities for United Airlines and Five Below

0.37

Correlation Coefficient

United Airlines  Five Below

Weak diversification

The 3 months correlation between United and Five is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of United Airlines i.e., United Airlines and Five Below go up and down completely randomly.

Pair Corralation between United Airlines and Five Below

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 0.99 times more return on investment than Five Below. However, United Airlines Holdings is 1.01 times less risky than Five Below. It trades about 0.07 of its potential returns per unit of risk. Five Below is currently generating about -0.03 per unit of risk. If you would invest  4,680  in United Airlines Holdings on October 5, 2024 and sell it today you would earn a total of  4,820  from holding United Airlines Holdings or generate 102.99% return on investment over 90 days.

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

United Airlines Holdings  vs.  Five Below

United Airlines Holdings

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Five Below

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Five Below has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Five Below reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Airlines and Five Below

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

The idea behind United Airlines Holdings and Five Below 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.