Correlation Between Southwest Airlines and International Biotechnology
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and International Biotechnology 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 International Biotechnology 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 International Biotechnology Trust, you can compare the effects of market volatilities on Southwest Airlines and International Biotechnology 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 International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and International Biotechnology.
Diversification Opportunities for Southwest Airlines and International Biotechnology
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and International is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and International Biotechnology go up and down completely randomly.
Pair Corralation between Southwest Airlines and International Biotechnology
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 1.24 times more return on investment than International Biotechnology. However, Southwest Airlines is 1.24 times more volatile than International Biotechnology Trust. It trades about 0.15 of its potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.03 per unit of risk. If you would invest 3,025 in Southwest Airlines Co on August 29, 2024 and sell it today you would earn a total of 181.00 from holding Southwest Airlines Co or generate 5.98% 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. International Biotechnology Tr
Performance |
| Timeline |
| Southwest Airlines |
| International Biotechnology |
Southwest Airlines and International Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and International Biotechnology
The main advantage of trading using opposite Southwest Airlines and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, International Biotechnology 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 International Biotechnology will offset losses from the drop in International Biotechnology's long position.| Southwest Airlines vs. bet at home AG | Southwest Airlines vs. Wyndham Hotels Resorts | Southwest Airlines vs. Odfjell Drilling | Southwest Airlines vs. Ecclesiastical Insurance Office |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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