Correlation Between Universal Technical and American Airlines
Can any of the company-specific risk be diversified away by investing in both Universal Technical and American Airlines 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 Universal Technical and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Technical Institute and American Airlines Group, you can compare the effects of market volatilities on Universal Technical and American Airlines 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 Universal Technical with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Technical and American Airlines.
Diversification Opportunities for Universal Technical and American Airlines
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Universal Technical 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 Universal Technical Institute are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Universal Technical i.e., Universal Technical and American Airlines go up and down completely randomly.
Pair Corralation between Universal Technical and American Airlines
Considering the 90-day investment horizon Universal Technical Institute is expected to generate 1.14 times more return on investment than American Airlines. However, Universal Technical is 1.14 times more volatile than American Airlines Group. It trades about 0.1 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest 765.00 in Universal Technical Institute on December 29, 2023 and sell it today you would earn a total of 753.00 from holding Universal Technical Institute or generate 98.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Universal Technical Institute vs. American Airlines Group
Performance |
Timeline |
Universal Technical |
American Airlines |
Universal Technical and American Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Universal Technical and American Airlines
The main advantage of trading using opposite Universal Technical and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Technical position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.Universal Technical vs. IhumanInc | Universal Technical vs. Jianzhi Education Technology | Universal Technical vs. 17 Education Technology | Universal Technical vs. MYnd Analytics |
American Airlines vs. Canadian Pacific Railway | American Airlines vs. Daseke Inc | American Airlines vs. Marten Transport | American Airlines vs. Werner Enterprises |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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