Correlation Between Boston Scientific and United Airlines

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

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

Diversification Opportunities for Boston Scientific and United Airlines

0.95

Correlation Coefficient

Boston Scientific  United Airlines

Almost no diversification

The 3 months correlation between Boston and United is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific 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 Boston Scientific 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 Boston Scientific 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 Boston Scientific i.e., Boston Scientific and United Airlines go up and down completely randomly.

Pair Corralation between Boston Scientific and United Airlines

Assuming the 90 days trading horizon Boston Scientific is expected to generate 3.86 times less return on investment than United Airlines. But when comparing it to its historical volatility, Boston Scientific is 2.74 times less risky than United Airlines. It trades about 0.28 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  14,790  in United Airlines Holdings on September 25, 2024 and sell it today you would earn a total of  15,990  from holding United Airlines Holdings or generate 108.11% return on investment over 90 days.

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

Boston Scientific  vs.  United Airlines Holdings

Boston Scientific

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boston Scientific sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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 Boston Scientific and United Airlines

The main advantage of trading using opposite Boston Scientific and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific 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 Boston Scientific 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.