Correlation Between United Airlines and Hoteles City

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

Diversification Opportunities for United Airlines and Hoteles City

0.2

Correlation Coefficient

United Airlines  Hoteles City

Modest diversification

The 3 months correlation between United and Hoteles is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Hoteles City Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles City Express 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 Hoteles City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles City Express has no effect on the direction of United Airlines i.e., United Airlines and Hoteles City go up and down completely randomly.

Pair Corralation between United Airlines and Hoteles City

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.0 times more return on investment than Hoteles City. However, United Airlines Holdings is 1.0 times less risky than Hoteles City. It trades about 0.46 of its potential returns per unit of risk. Hoteles City Express is currently generating about 0.04 per unit of risk. If you would invest  87,038  in United Airlines Holdings on August 30, 2024 and sell it today you would earn a total of  118,962  from holding United Airlines Holdings or generate 136.68% 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.  Hoteles City Express

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. In spite of fairly weak essential indicators, United Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Hoteles City Express

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles City Express are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Hoteles City may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with United Airlines and Hoteles City

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

The idea behind United Airlines Holdings and Hoteles City Express 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.