Correlation Between Southwest Airlines and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Samsung Electronics 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 Samsung Electronics 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 Samsung Electronics Co, you can compare the effects of market volatilities on Southwest Airlines and Samsung Electronics 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 Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Samsung Electronics.
Diversification Opportunities for Southwest Airlines and Samsung Electronics
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Samsung is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Samsung Electronics go up and down completely randomly.
Pair Corralation between Southwest Airlines and Samsung Electronics
Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 0.68 times more return on investment than Samsung Electronics. However, Southwest Airlines Co is 1.48 times less risky than Samsung Electronics. It trades about 0.15 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.01 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Samsung Electronics Co
Performance |
| Timeline |
| Southwest Airlines |
| Samsung Electronics |
Southwest Airlines and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Samsung Electronics
The main advantage of trading using opposite Southwest Airlines and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Samsung Electronics 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' 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 |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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