Correlation Between EBRO FOODS and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both EBRO FOODS 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 EBRO FOODS and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EBRO FOODS and Southwest Airlines Co, you can compare the effects of market volatilities on EBRO FOODS 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 EBRO FOODS with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBRO FOODS and Southwest Airlines.
Diversification Opportunities for EBRO FOODS and Southwest Airlines
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between EBRO and Southwest is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding EBRO 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 EBRO FOODS 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 EBRO 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 EBRO FOODS i.e., EBRO FOODS and Southwest Airlines go up and down completely randomly.
Pair Corralation between EBRO FOODS and Southwest Airlines
Assuming the 90 days trading horizon EBRO FOODS is expected to generate 6.14 times less return on investment than Southwest Airlines. But when comparing it to its historical volatility, EBRO FOODS is 1.47 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 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,654 in Southwest Airlines Co on September 25, 2024 and sell it today you would earn a total of 526.00 from holding Southwest Airlines Co or generate 19.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EBRO FOODS vs. Southwest Airlines Co
Performance |
| Timeline |
| EBRO FOODS |
| Southwest Airlines |
EBRO FOODS and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EBRO FOODS and Southwest Airlines
The main advantage of trading using opposite EBRO FOODS and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBRO FOODS 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.The idea behind EBRO FOODS and Southwest Airlines Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Southwest Airlines vs. CDL INVESTMENT | Southwest Airlines vs. TRAVEL LEISURE DL 01 | Southwest Airlines vs. PLAYTIKA HOLDING DL 01 | Southwest Airlines vs. Playa Hotels Resorts |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |