Correlation Between Southwest Airlines and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Ebro Foods 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 Ebro Foods 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 Ebro Foods, you can compare the effects of market volatilities on Southwest Airlines and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Ebro Foods.
Diversification Opportunities for Southwest Airlines and Ebro Foods
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and Ebro is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Ebro Foods go up and down completely randomly.
Pair Corralation between Southwest Airlines and Ebro Foods
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 2.95 times more return on investment than Ebro Foods. However, Southwest Airlines is 2.95 times more volatile than Ebro Foods. It trades about 0.18 of its potential returns per unit of risk. Ebro Foods is currently generating about -0.05 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Ebro Foods
Performance |
| Timeline |
| Southwest Airlines |
| Ebro Foods |
Southwest Airlines and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Ebro Foods
The main advantage of trading using opposite Southwest Airlines and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' 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 |
| Ebro Foods vs. Roadside Real Estate | Ebro Foods vs. International Biotechnology Trust | Ebro Foods vs. Broadridge Financial Solutions | Ebro Foods vs. Norman Broadbent Plc |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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