Correlation Between United Airlines and ArcelorMittal

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

Diversification Opportunities for United Airlines and ArcelorMittal

0.0

Correlation Coefficient

United Airlines  ArcelorMittal

Pay attention - limited upside

The 3 months correlation between United and ArcelorMittal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of United Airlines i.e., United Airlines and ArcelorMittal go up and down completely randomly.

Pair Corralation between United Airlines and ArcelorMittal

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 1.37 times more return on investment than ArcelorMittal. However, United Airlines is 1.37 times more volatile than ArcelorMittal SA ADR. It trades about 0.08 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.01 per unit of risk. If you would invest  4,224  in United Airlines Holdings on September 27, 2024 and sell it today you would earn a total of  5,892  from holding United Airlines Holdings or generate 139.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Airlines Holdings  vs.  ArcelorMittal SA ADR

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.

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Airlines and ArcelorMittal

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

The idea behind United Airlines Holdings and ArcelorMittal SA ADR 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.