Correlation Between Southwest Airlines and Zurich Insurance
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Zurich Insurance 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 Zurich Insurance 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 Zurich Insurance Group, you can compare the effects of market volatilities on Southwest Airlines and Zurich Insurance 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 Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Zurich Insurance.
Diversification Opportunities for Southwest Airlines and Zurich Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Zurich is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance 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 Zurich Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurich Insurance has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Zurich Insurance go up and down completely randomly.
Pair Corralation between Southwest Airlines and Zurich Insurance
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 2.49 times less return on investment than Zurich Insurance. In addition to that, Southwest Airlines is 2.35 times more volatile than Zurich Insurance Group. It trades about 0.01 of its total potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.05 per unit of volatility. If you would invest 44,441 in Zurich Insurance Group on October 30, 2024 and sell it today you would earn a total of 10,139 from holding Zurich Insurance Group or generate 22.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Zurich Insurance Group
Performance |
| Timeline |
| Southwest Airlines |
| Zurich Insurance |
Southwest Airlines and Zurich Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Zurich Insurance
The main advantage of trading using opposite Southwest Airlines and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Zurich Insurance 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 Zurich Insurance will offset losses from the drop in Zurich Insurance's long position.| Southwest Airlines vs. St Galler Kantonalbank | Southwest Airlines vs. MoneysupermarketCom Group PLC | Southwest Airlines vs. Ion Beam Applications | Southwest Airlines vs. Commerzbank AG |
| Zurich Insurance vs. CAP LEASE AVIATION | Zurich Insurance vs. United Airlines Holdings | Zurich Insurance vs. MoneysupermarketCom Group PLC | Zurich Insurance vs. Scandinavian Tobacco Group |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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