Correlation Between Apartment Investment and United Airlines

Can any of the company-specific risk be diversified away by investing in both Apartment Investment and United Airlines 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 Apartment Investment and United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apartment Investment and and United Airlines Holdings, you can compare the effects of market volatilities on Apartment Investment and United Airlines 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 Apartment Investment with a short position of United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and United Airlines.

Diversification Opportunities for Apartment Investment and United Airlines

0.62

Correlation Coefficient

Apartment Investment  United Airlines

Poor diversification

The 3 months correlation between Apartment and United is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings and Apartment Investment 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 Apartment Investment and are associated (or correlated) with United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Apartment Investment i.e., Apartment Investment and United Airlines go up and down completely randomly.

Pair Corralation between Apartment Investment and United Airlines

Assuming the 90 days trading horizon Apartment Investment and is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Apartment Investment and is 1.69 times less risky than United Airlines. The stock trades about -0.01 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  14,672  in United Airlines Holdings on September 24, 2024 and sell it today you would earn a total of  15,227  from holding United Airlines Holdings or generate 103.78% return on investment over 90 days.

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

Apartment Investment and  vs.  United Airlines Holdings

Apartment Investment and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apartment Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Apartment Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

United Airlines Holdings

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apartment Investment and United Airlines

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

The idea behind Apartment Investment and and United Airlines 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.