Correlation Between GP Investments and United Airlines

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

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

Diversification Opportunities for GP Investments and United Airlines

-0.47

Correlation Coefficient

GP Investments  United Airlines

Very good diversification

The 3 months correlation between GPIV33 and United is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments 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 GP Investments 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 GP Investments 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 GP Investments i.e., GP Investments and United Airlines go up and down completely randomly.

Pair Corralation between GP Investments and United Airlines

Assuming the 90 days trading horizon GP Investments is expected to under-perform the United Airlines. In addition to that, GP Investments is 1.39 times more volatile than United Airlines Holdings. It trades about -0.01 of its total potential returns per unit of risk. United Airlines Holdings is currently generating about 0.47 per unit of volatility. If you would invest  12,396  in United Airlines Holdings on September 3, 2024 and sell it today you would earn a total of  16,818  from holding United Airlines Holdings or generate 135.67% return on investment over 90 days.

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

GP Investments  vs.  United Airlines Holdings

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

United Airlines Holdings

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 36 (%) 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 GP Investments and United Airlines

The main advantage of trading using opposite GP Investments and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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 GP Investments 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .