Correlation Between Global Ship and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Global Ship and Southwest Airlines 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 Global Ship and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and Southwest Airlines Co, you can compare the effects of market volatilities on Global Ship and Southwest Airlines 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 Global Ship with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Southwest Airlines.
Diversification Opportunities for Global Ship and Southwest Airlines
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Southwest is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Global Ship 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 Global Ship Lease are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Global Ship i.e., Global Ship and Southwest Airlines go up and down completely randomly.
Pair Corralation between Global Ship and Southwest Airlines
Assuming the 90 days horizon Global Ship Lease is expected to generate 1.93 times more return on investment than Southwest Airlines. However, Global Ship is 1.93 times more volatile than Southwest Airlines Co. It trades about 0.06 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.02 per unit of risk. If you would invest 2,080 in Global Ship Lease on October 11, 2024 and sell it today you would earn a total of 44.00 from holding Global Ship Lease or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. Southwest Airlines Co
Performance |
| Timeline |
| Global Ship Lease |
| Southwest Airlines |
Global Ship and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and Southwest Airlines
The main advantage of trading using opposite Global Ship and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Global Ship vs. CEOTRONICS | Global Ship vs. Coor Service Management | Global Ship vs. Pure Storage | Global Ship vs. LANDSEA GREEN MANAGEMENT |
| Southwest Airlines vs. Corporate Office Properties | Southwest Airlines vs. UNITED RENTALS | Southwest Airlines vs. Nanjing Panda Electronics | Southwest Airlines vs. ALBIS LEASING AG |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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