Correlation Between MidCap Financial and SOUTHWEST AIRLINES
Can any of the company-specific risk be diversified away by investing in both MidCap Financial 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 MidCap Financial and SOUTHWEST AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and SOUTHWEST AIRLINES, you can compare the effects of market volatilities on MidCap Financial 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 MidCap Financial with a short position of SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and SOUTHWEST AIRLINES.
Diversification Opportunities for MidCap Financial and SOUTHWEST AIRLINES
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MidCap and SOUTHWEST is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES and MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and SOUTHWEST AIRLINES go up and down completely randomly.
Pair Corralation between MidCap Financial and SOUTHWEST AIRLINES
Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.67 times more return on investment than SOUTHWEST AIRLINES. However, MidCap Financial Investment is 1.48 times less risky than SOUTHWEST AIRLINES. It trades about 0.08 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about -0.14 per unit of risk. If you would invest 1,295 in MidCap Financial Investment on October 30, 2024 and sell it today you would earn a total of 19.00 from holding MidCap Financial Investment or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidCap Financial Investment vs. SOUTHWEST AIRLINES
Performance |
| Timeline |
| MidCap Financial Inv |
| SOUTHWEST AIRLINES |
MidCap Financial and SOUTHWEST AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and SOUTHWEST AIRLINES
The main advantage of trading using opposite MidCap Financial and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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's long position.| MidCap Financial vs. KENEDIX OFFICE INV | MidCap Financial vs. 24SEVENOFFICE GROUP AB | MidCap Financial vs. SILICON LABORATOR | MidCap Financial vs. CHEMICAL INDUSTRIES |
| SOUTHWEST AIRLINES vs. FIREWEED METALS P | SOUTHWEST AIRLINES vs. International Consolidated Airlines | SOUTHWEST AIRLINES vs. Jacquet Metal Service | SOUTHWEST AIRLINES vs. GREENX METALS LTD |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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