Correlation Between Southwest Airlines and GlobalData PLC
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and GlobalData PLC 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 GlobalData PLC 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 GlobalData PLC, you can compare the effects of market volatilities on Southwest Airlines and GlobalData PLC 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 GlobalData PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and GlobalData PLC.
Diversification Opportunities for Southwest Airlines and GlobalData PLC
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and GlobalData is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and GlobalData PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalData PLC 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 GlobalData PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalData PLC has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and GlobalData PLC go up and down completely randomly.
Pair Corralation between Southwest Airlines and GlobalData PLC
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 0.96 times more return on investment than GlobalData PLC. However, Southwest Airlines Co is 1.04 times less risky than GlobalData PLC. It trades about -0.07 of its potential returns per unit of risk. GlobalData PLC is currently generating about -0.16 per unit of risk. If you would invest 3,300 in Southwest Airlines Co on November 1, 2024 and sell it today you would lose (181.00) from holding Southwest Airlines Co or give up 5.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Southwest Airlines Co vs. GlobalData PLC
Performance |
| Timeline |
| Southwest Airlines |
| GlobalData PLC |
Southwest Airlines and GlobalData PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and GlobalData PLC
The main advantage of trading using opposite Southwest Airlines and GlobalData PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, GlobalData PLC 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 GlobalData PLC will offset losses from the drop in GlobalData PLC's long position.| Southwest Airlines vs. CVS Health Corp | Southwest Airlines vs. Molson Coors Beverage | Southwest Airlines vs. National Beverage Corp | Southwest Airlines vs. Eco Animal Health |
| GlobalData PLC vs. Software Circle plc | GlobalData PLC vs. Sparebank 1 SR | GlobalData PLC vs. Southwest Airlines Co | GlobalData PLC vs. Endeavour Mining 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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