Correlation Between Southwest Airlines and CompuGroup Medical
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and CompuGroup Medical 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 CompuGroup Medical 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 CompuGroup Medical AG, you can compare the effects of market volatilities on Southwest Airlines and CompuGroup Medical 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 CompuGroup Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and CompuGroup Medical.
Diversification Opportunities for Southwest Airlines and CompuGroup Medical
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and CompuGroup is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and CompuGroup Medical AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompuGroup Medical 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 CompuGroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompuGroup Medical has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and CompuGroup Medical go up and down completely randomly.
Pair Corralation between Southwest Airlines and CompuGroup Medical
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 0.8 times more return on investment than CompuGroup Medical. However, Southwest Airlines Co is 1.26 times less risky than CompuGroup Medical. It trades about 0.18 of its potential returns per unit of risk. CompuGroup Medical AG is currently generating about 0.09 per unit of risk. If you would invest 3,025 in Southwest Airlines Co on August 28, 2024 and sell it today you would earn a total of 211.00 from holding Southwest Airlines Co or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. CompuGroup Medical AG
Performance |
| Timeline |
| Southwest Airlines |
| CompuGroup Medical |
Southwest Airlines and CompuGroup Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and CompuGroup Medical
The main advantage of trading using opposite Southwest Airlines and CompuGroup Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, CompuGroup Medical 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 CompuGroup Medical will offset losses from the drop in CompuGroup Medical's long position.| Southwest Airlines vs. PPHE Hotel Group | Southwest Airlines vs. Summit Materials Cl | Southwest Airlines vs. Host Hotels Resorts | Southwest Airlines vs. Norman Broadbent Plc |
| CompuGroup Medical vs. Samsung Electronics Co | CompuGroup Medical vs. Samsung Electronics Co | CompuGroup Medical vs. Hyundai Motor | CompuGroup Medical vs. Toyota Motor Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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