Correlation Between Southwest Airlines and Sherborne Investors
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Sherborne Investors 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 Sherborne Investors 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 Sherborne Investors Guernsey, you can compare the effects of market volatilities on Southwest Airlines and Sherborne Investors 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 Sherborne Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Sherborne Investors.
Diversification Opportunities for Southwest Airlines and Sherborne Investors
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Sherborne is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Sherborne Investors Guernsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherborne Investors 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 Sherborne Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherborne Investors has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Sherborne Investors go up and down completely randomly.
Pair Corralation between Southwest Airlines and Sherborne Investors
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 1.83 times more return on investment than Sherborne Investors. However, Southwest Airlines is 1.83 times more volatile than Sherborne Investors Guernsey. It trades about 0.1 of its potential returns per unit of risk. Sherborne Investors Guernsey is currently generating about 0.17 per unit of risk. If you would invest 3,096 in Southwest Airlines Co on August 30, 2024 and sell it today you would earn a total of 115.00 from holding Southwest Airlines Co or generate 3.71% 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. Sherborne Investors Guernsey
Performance |
| Timeline |
| Southwest Airlines |
| Sherborne Investors |
Southwest Airlines and Sherborne Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Sherborne Investors
The main advantage of trading using opposite Southwest Airlines and Sherborne Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Sherborne Investors 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 Sherborne Investors will offset losses from the drop in Sherborne Investors' long position.| Southwest Airlines vs. Tungsten West PLC | Southwest Airlines vs. Argo Group Limited | Southwest Airlines vs. Hardide PLC | Southwest Airlines vs. Versarien PLC |
| Sherborne Investors vs. Advanced Medical Solutions | Sherborne Investors vs. Roper Technologies | Sherborne Investors vs. Southwest Airlines Co | Sherborne Investors vs. L3Harris Technologies |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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