Correlation Between Southwest Airlines and Federal Realty
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Federal Realty 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 Federal Realty 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 Federal Realty Investment, you can compare the effects of market volatilities on Southwest Airlines and Federal Realty 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 Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Federal Realty.
Diversification Opportunities for Southwest Airlines and Federal Realty
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and Federal is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Federal Realty go up and down completely randomly.
Pair Corralation between Southwest Airlines and Federal Realty
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 1.73 times more return on investment than Federal Realty. However, Southwest Airlines is 1.73 times more volatile than Federal Realty Investment. It trades about 0.03 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.04 per unit of risk. If you would invest 2,855 in Southwest Airlines Co on November 28, 2024 and sell it today you would earn a total of 148.00 from holding Southwest Airlines Co or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
Southwest Airlines Co vs. Federal Realty Investment
Performance |
| Timeline |
| Southwest Airlines |
| Federal Realty Investment |
Southwest Airlines and Federal Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Federal Realty
The main advantage of trading using opposite Southwest Airlines and Federal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Federal Realty 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 Federal Realty will offset losses from the drop in Federal Realty's long position.| Southwest Airlines vs. Catalyst Media Group | Southwest Airlines vs. One Media iP | Southwest Airlines vs. SBM Offshore NV | Southwest Airlines vs. XLMedia PLC |
| Federal Realty vs. Zegona Communications Plc | Federal Realty vs. Charter Communications Cl | Federal Realty vs. Axfood AB | Federal Realty vs. Supermarket Income REIT |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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