Correlation Between United Airlines and National Vision

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

Diversification Opportunities for United Airlines and National Vision

0.66

Correlation Coefficient

United Airlines  National Vision

Poor diversification

The 3 months correlation between United and National is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of United Airlines i.e., United Airlines and National Vision go up and down completely randomly.

Pair Corralation between United Airlines and National Vision

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 1.1 times more return on investment than National Vision. However, United Airlines is 1.1 times more volatile than National Vision Holdings. It trades about 0.33 of its potential returns per unit of risk. National Vision Holdings is currently generating about -0.01 per unit of risk. If you would invest  5,706  in United Airlines Holdings on September 29, 2024 and sell it today you would earn a total of  4,259  from holding United Airlines Holdings or generate 74.64% return on investment over 90 days.

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

United Airlines Holdings  vs.  National Vision Holdings

United Airlines Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

National Vision Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Vision Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, National Vision is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Airlines and National Vision

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

The idea behind United Airlines Holdings and National Vision 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.