Correlation Between Southwest Airlines and Ion Beam
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Ion Beam 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 Southwest Airlines and Ion Beam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines Co and Ion Beam Applications, you can compare the effects of market volatilities on Southwest Airlines and Ion Beam 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 Southwest Airlines with a short position of Ion Beam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Ion Beam.
Diversification Opportunities for Southwest Airlines and Ion Beam
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southwest and Ion is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications and Southwest 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 Southwest Airlines Co are associated (or correlated) with Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Ion Beam go up and down completely randomly.
Pair Corralation between Southwest Airlines and Ion Beam
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Ion Beam. In addition to that, Southwest Airlines is 1.02 times more volatile than Ion Beam Applications. It trades about -0.18 of its total potential returns per unit of risk. Ion Beam Applications is currently generating about 0.01 per unit of volatility. If you would invest 1,355 in Ion Beam Applications on November 3, 2024 and sell it today you would earn a total of 1.00 from holding Ion Beam Applications or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Ion Beam Applications
Performance |
| Timeline |
| Southwest Airlines |
| Ion Beam Applications |
Southwest Airlines and Ion Beam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Ion Beam
The main advantage of trading using opposite Southwest Airlines and Ion Beam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Ion Beam 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 Ion Beam will offset losses from the drop in Ion Beam's long position.| Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Toyota Motor Corp | Southwest Airlines vs. Reliance Industries Ltd |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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