Correlation Between Southwest Airlines and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and LPKF Laser 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 LPKF Laser 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 LPKF Laser Electronics, you can compare the effects of market volatilities on Southwest Airlines and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and LPKF Laser.
Diversification Opportunities for Southwest Airlines and LPKF Laser
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Southwest and LPKF is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and LPKF Laser go up and down completely randomly.
Pair Corralation between Southwest Airlines and LPKF Laser
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 2.98 times more return on investment than LPKF Laser. However, Southwest Airlines is 2.98 times more volatile than LPKF Laser Electronics. It trades about 0.26 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.15 per unit of risk. If you would invest 2,872 in Southwest Airlines Co on August 25, 2024 and sell it today you would earn a total of 329.00 from holding Southwest Airlines Co or generate 11.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Southwest Airlines Co vs. LPKF Laser Electronics
Performance |
| Timeline |
| Southwest Airlines |
| LPKF Laser Electronics |
Southwest Airlines and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and LPKF Laser
The main advantage of trading using opposite Southwest Airlines and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.| Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Samsung Electronics Co | Southwest Airlines vs. Hyundai Motor | Southwest Airlines vs. Toyota Motor Corp |
| LPKF Laser vs. Samsung Electronics Co | LPKF Laser vs. Samsung Electronics Co | LPKF Laser vs. Hyundai Motor | LPKF Laser 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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