Correlation Between United Airlines and Avianca Holdings

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

Diversification Opportunities for United Airlines and Avianca Holdings

0.0

Correlation Coefficient

United Airlines  Avianca Holdings

Pay attention - limited upside

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

Pair Corralation between United Airlines and Avianca Holdings

If you would invest  4,476  in United Airlines Holdings on February 26, 2024 and sell it today you would earn a total of  697.00  from holding United Airlines Holdings or generate 15.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

United Airlines Holdings  vs.  Avianca Holdings SA

United Airlines Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 6 (%) 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.

Avianca Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avianca Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Avianca Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with United Airlines and Avianca Holdings

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

The idea behind United Airlines Holdings and Avianca Holdings SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .