Correlation Between United Airlines and Dollarama

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

Diversification Opportunities for United Airlines and Dollarama

0.9

Correlation Coefficient

United Airlines  Dollarama

Almost no diversification

The 3 months correlation between United and Dollarama is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of United Airlines i.e., United Airlines and Dollarama go up and down completely randomly.

Pair Corralation between United Airlines and Dollarama

Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 2.01 times more return on investment than Dollarama. However, United Airlines is 2.01 times more volatile than Dollarama. It trades about 0.48 of its potential returns per unit of risk. Dollarama is currently generating about 0.14 per unit of risk. If you would invest  3,956  in United Airlines Holdings on September 4, 2024 and sell it today you would earn a total of  5,186  from holding United Airlines Holdings or generate 131.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

United Airlines Holdings  vs.  Dollarama

United Airlines Holdings

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Dollarama

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Airlines and Dollarama

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

The idea behind United Airlines Holdings and Dollarama 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.