Correlation Between American Airlines and United Parcel
Can any of the company-specific risk be diversified away by investing in both American Airlines and United Parcel 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 American Airlines and United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and United Parcel Service, you can compare the effects of market volatilities on American Airlines and United Parcel 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 American Airlines with a short position of United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and United Parcel.
Diversification Opportunities for American Airlines and United Parcel
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and United is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service and American 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 American Airlines Group are associated (or correlated) with United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of American Airlines i.e., American Airlines and United Parcel go up and down completely randomly.
Pair Corralation between American Airlines and United Parcel
Considering the 90-day investment horizon American Airlines Group is expected to under-perform the United Parcel. In addition to that, American Airlines is 1.7 times more volatile than United Parcel Service. It trades about -0.01 of its total potential returns per unit of risk. United Parcel Service is currently generating about -0.01 per unit of volatility. If you would invest 17,044 in United Parcel Service on January 24, 2024 and sell it today you would lose (2,508) from holding United Parcel Service or give up 14.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Airlines Group vs. United Parcel Service
Performance |
| Timeline |
| American Airlines |
| United Parcel Service |
American Airlines and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and United Parcel
The main advantage of trading using opposite American Airlines and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| United Parcel vs. JB Hunt Transport | United Parcel vs. Aquagold International | United Parcel vs. Thrivent High Yield | United Parcel vs. Morningstar Unconstrained Allocation |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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