Correlation Between Southwest Airlines and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals, you can compare the effects of market volatilities on Southwest Airlines and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Sovereign Metals.
Diversification Opportunities for Southwest Airlines and Sovereign Metals
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Southwest and Sovereign is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Sovereign Metals go up and down completely randomly.
Pair Corralation between Southwest Airlines and Sovereign Metals
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 1.2 times less risky than Sovereign Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Sovereign Metals is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3,600 in Sovereign Metals on October 30, 2024 and sell it today you would earn a total of 480.00 from holding Sovereign Metals or generate 13.33% 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. Sovereign Metals
Performance |
| Timeline |
| Southwest Airlines |
| Sovereign Metals |
Southwest Airlines and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Sovereign Metals
The main advantage of trading using opposite Southwest Airlines and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| Southwest Airlines vs. St Galler Kantonalbank | Southwest Airlines vs. MoneysupermarketCom Group PLC | Southwest Airlines vs. Ion Beam Applications | Southwest Airlines vs. Commerzbank AG |
| Sovereign Metals vs. Givaudan SA | Sovereign Metals vs. Antofagasta PLC | Sovereign Metals vs. Ferrexpo PLC | Sovereign Metals vs. Atalaya Mining |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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