Correlation Between Southwest Airlines and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Vodafone Group 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 Vodafone Group 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 Vodafone Group PLC, you can compare the effects of market volatilities on Southwest Airlines and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Vodafone Group.
Diversification Opportunities for Southwest Airlines and Vodafone Group
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Southwest and Vodafone is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Vodafone Group go up and down completely randomly.
Pair Corralation between Southwest Airlines and Vodafone Group
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Vodafone Group. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 1.51 times less risky than Vodafone Group. The stock trades about -0.17 of its potential returns per unit of risk. The Vodafone Group PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,798 in Vodafone Group PLC on November 28, 2024 and sell it today you would earn a total of 126.00 from holding Vodafone Group PLC or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Southwest Airlines Co vs. Vodafone Group PLC
Performance |
| Timeline |
| Southwest Airlines |
| Vodafone Group PLC |
Southwest Airlines and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Vodafone Group
The main advantage of trading using opposite Southwest Airlines and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.| Southwest Airlines vs. Catalyst Media Group | Southwest Airlines vs. One Media iP | Southwest Airlines vs. SBM Offshore NV | Southwest Airlines vs. XLMedia PLC |
| Vodafone Group vs. Berner Kantonalbank AG | Vodafone Group vs. Virgin Wines UK | Vodafone Group vs. Discover Financial Services | Vodafone Group vs. Fulcrum Metals PLC |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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