Correlation Between Fresenius Medical and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and Southwest 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 Fresenius Medical and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fresenius Medical Care and Southwest Airlines Co, you can compare the effects of market volatilities on Fresenius Medical and Southwest 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 Fresenius Medical with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Southwest Airlines.
Diversification Opportunities for Fresenius Medical and Southwest Airlines
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fresenius and Southwest is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Southwest Airlines go up and down completely randomly.
Pair Corralation between Fresenius Medical and Southwest Airlines
Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 1.15 times more return on investment than Southwest Airlines. However, Fresenius Medical is 1.15 times more volatile than Southwest Airlines Co. It trades about 0.23 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.18 per unit of risk. If you would invest 3,875 in Fresenius Medical Care on August 28, 2024 and sell it today you would earn a total of 403.00 from holding Fresenius Medical Care or generate 10.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fresenius Medical Care vs. Southwest Airlines Co
Performance |
| Timeline |
| Fresenius Medical Care |
| Southwest Airlines |
Fresenius Medical and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fresenius Medical and Southwest Airlines
The main advantage of trading using opposite Fresenius Medical and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical position performs unexpectedly, Southwest 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Fresenius Medical vs. PPHE Hotel Group | Fresenius Medical vs. Park Hotels Resorts | Fresenius Medical vs. Electronic Arts | Fresenius Medical vs. Fidelity National Information |
| Southwest Airlines vs. PPHE Hotel Group | Southwest Airlines vs. Summit Materials Cl | Southwest Airlines vs. Host Hotels Resorts | Southwest Airlines vs. Norman Broadbent Plc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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