Correlation Between Southwest Airlines and Boston Properties
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Boston Properties 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 Boston Properties 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 Boston Properties, you can compare the effects of market volatilities on Southwest Airlines and Boston Properties 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 Boston Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Boston Properties.
Diversification Opportunities for Southwest Airlines and Boston Properties
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southwest and Boston is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Boston Properties go up and down completely randomly.
Pair Corralation between Southwest Airlines and Boston Properties
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 6.06 times less return on investment than Boston Properties. But when comparing it to its historical volatility, Southwest Airlines Co is 1.03 times less risky than Boston Properties. It trades about 0.01 of its potential returns per unit of risk. Boston Properties is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,955 in Boston Properties on September 12, 2024 and sell it today you would earn a total of 3,222 from holding Boston Properties or generate 65.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.93% |
| Values | Daily Returns |
Southwest Airlines Co vs. Boston Properties
Performance |
| Timeline |
| Southwest Airlines |
| Boston Properties |
Southwest Airlines and Boston Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Boston Properties
The main advantage of trading using opposite Southwest Airlines and Boston Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Boston Properties 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 Boston Properties will offset losses from the drop in Boston Properties' long position.| Southwest Airlines vs. iShares Physical Silver | Southwest Airlines vs. AfriTin Mining | Southwest Airlines vs. Premier Foods PLC | Southwest Airlines vs. National Beverage Corp |
| Boston Properties vs. Arrow Electronics | Boston Properties vs. Impax Environmental Markets | Boston Properties vs. Cairo Communication SpA | Boston Properties vs. Charter Communications Cl |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |