Correlation Between Southwest Airlines and Bioventix
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Bioventix 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 Bioventix 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 Bioventix, you can compare the effects of market volatilities on Southwest Airlines and Bioventix 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 Bioventix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Bioventix.
Diversification Opportunities for Southwest Airlines and Bioventix
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Bioventix is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Bioventix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioventix 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 Bioventix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioventix has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Bioventix go up and down completely randomly.
Pair Corralation between Southwest Airlines and Bioventix
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Bioventix. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 1.17 times less risky than Bioventix. The stock trades about -0.2 of its potential returns per unit of risk. The Bioventix is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 302,000 in Bioventix on December 9, 2024 and sell it today you would lose (23,000) from holding Bioventix or give up 7.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Bioventix
Performance |
| Timeline |
| Southwest Airlines |
| Bioventix |
Southwest Airlines and Bioventix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Bioventix
The main advantage of trading using opposite Southwest Airlines and Bioventix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Bioventix 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 Bioventix will offset losses from the drop in Bioventix's long position.| Southwest Airlines vs. Tatton Asset Management | ||
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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