Correlation Between Big 5 and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Southwest Airlines Co, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Southwest Airlines.
Diversification Opportunities for Big 5 and Southwest Airlines
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Big and Southwest is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Southwest Airlines go up and down completely randomly.
Pair Corralation between Big 5 and Southwest Airlines
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Southwest Airlines. In addition to that, Big 5 is 2.34 times more volatile than Southwest Airlines Co. It trades about -0.02 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.08 per unit of volatility. If you would invest 3,083 in Southwest Airlines Co on September 13, 2024 and sell it today you would earn a total of 79.00 from holding Southwest Airlines Co or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Big 5 Sporting vs. Southwest Airlines Co
Performance |
| Timeline |
| Big 5 Sporting |
| Southwest Airlines |
Big 5 and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Southwest Airlines
The main advantage of trading using opposite Big 5 and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.| Big 5 vs. Superior Plus Corp | Big 5 vs. SIVERS SEMICONDUCTORS AB | Big 5 vs. NorAm Drilling AS | Big 5 vs. Norsk Hydro ASA |
| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Ryanair Holdings plc | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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