Correlation Between Canadian General and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Canadian General 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 Canadian General and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian General Investments and Southwest Airlines Co, you can compare the effects of market volatilities on Canadian General 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 Canadian General with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian General and Southwest Airlines.
Diversification Opportunities for Canadian General and Southwest Airlines
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Southwest is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Southwest Airlines go up and down completely randomly.
Pair Corralation between Canadian General and Southwest Airlines
Assuming the 90 days trading horizon Canadian General Investments is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Canadian General Investments is 1.5 times less risky than Southwest Airlines. The stock trades about -0.22 of its potential returns per unit of risk. The Southwest Airlines Co is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,337 in Southwest Airlines Co on October 11, 2024 and sell it today you would lose (73.00) from holding Southwest Airlines Co or give up 2.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Canadian General Investments vs. Southwest Airlines Co
Performance |
| Timeline |
| Canadian General Inv |
| Southwest Airlines |
Canadian General and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian General and Southwest Airlines
The main advantage of trading using opposite Canadian General and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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.| Canadian General vs. One Media iP | Canadian General vs. LBG Media PLC | Canadian General vs. Cornish Metals | Canadian General vs. Jacquet Metal Service |
| Southwest Airlines vs. National Beverage Corp | Southwest Airlines vs. Bloomsbury Publishing Plc | Southwest Airlines vs. European Metals Holdings | Southwest Airlines vs. Sovereign 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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