Correlation Between Southwest Airlines and Schroders Investment
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Schroders Investment 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 Schroders Investment 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 Schroders Investment Trusts, you can compare the effects of market volatilities on Southwest Airlines and Schroders Investment 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 Schroders Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Schroders Investment.
Diversification Opportunities for Southwest Airlines and Schroders Investment
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Schroders is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Schroders Investment Trusts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroders 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 Schroders Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroders Investment has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Schroders Investment go up and down completely randomly.
Pair Corralation between Southwest Airlines and Schroders Investment
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 1.23 times less return on investment than Schroders Investment. In addition to that, Southwest Airlines is 2.22 times more volatile than Schroders Investment Trusts. It trades about 0.02 of its total potential returns per unit of risk. Schroders Investment Trusts is currently generating about 0.05 per unit of volatility. If you would invest 38,837 in Schroders Investment Trusts on September 14, 2024 and sell it today you would earn a total of 9,463 from holding Schroders Investment Trusts or generate 24.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Schroders Investment Trusts
Performance |
| Timeline |
| Southwest Airlines |
| Schroders Investment |
Southwest Airlines and Schroders Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Schroders Investment
The main advantage of trading using opposite Southwest Airlines and Schroders Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Schroders Investment 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 Schroders Investment will offset losses from the drop in Schroders Investment's long position.| Southwest Airlines vs. Wizz Air Holdings | Southwest Airlines vs. Bankers Investment Trust | Southwest Airlines vs. Smithson Investment Trust | Southwest Airlines vs. Lowland Investment Co |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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