Correlation Between Associated British and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Southwest Airlines Co, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Southwest Airlines.
Diversification Opportunities for Associated British and Southwest Airlines
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Associated and Southwest is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Southwest Airlines go up and down completely randomly.
Pair Corralation between Associated British and Southwest Airlines
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.59 times more return on investment than Southwest Airlines. However, Associated British Foods is 1.68 times less risky than Southwest Airlines. It trades about 0.01 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.0 per unit of risk. If you would invest 184,761 in Associated British Foods on November 5, 2024 and sell it today you would earn a total of 5,439 from holding Associated British Foods or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Associated British Foods vs. Southwest Airlines Co
Performance |
| Timeline |
| Associated British Foods |
| Southwest Airlines |
Associated British and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Southwest Airlines
The main advantage of trading using opposite Associated British and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Chocoladefabriken Lindt Spruengli | Associated British vs. Rockwood Realisation PLC | Associated British vs. Toyota Motor Corp | Associated British vs. Johnson Matthey PLC |
| Southwest Airlines vs. MTI Wireless Edge | Southwest Airlines vs. Empire Metals Limited | Southwest Airlines vs. Gaztransport et Technigaz | Southwest Airlines vs. Cornish Metals |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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