Correlation Between National Retail and SOUTHWEST AIRLINES
Can any of the company-specific risk be diversified away by investing in both National Retail 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 National Retail and SOUTHWEST AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and SOUTHWEST AIRLINES, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and SOUTHWEST AIRLINES.
Diversification Opportunities for National Retail and SOUTHWEST AIRLINES
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and SOUTHWEST is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and SOUTHWEST AIRLINES go up and down completely randomly.
Pair Corralation between National Retail and SOUTHWEST AIRLINES
Assuming the 90 days trading horizon National Retail is expected to generate 16.13 times less return on investment than SOUTHWEST AIRLINES. But when comparing it to its historical volatility, National Retail Properties is 1.65 times less risky than SOUTHWEST AIRLINES. It trades about 0.0 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,213 in SOUTHWEST AIRLINES on October 14, 2024 and sell it today you would earn a total of 29.00 from holding SOUTHWEST AIRLINES or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Retail Properties vs. SOUTHWEST AIRLINES
Performance |
| Timeline |
| National Retail Prop |
| SOUTHWEST AIRLINES |
National Retail and SOUTHWEST AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and SOUTHWEST AIRLINES
The main advantage of trading using opposite National Retail and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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.| National Retail vs. Strategic Education | National Retail vs. CAREER EDUCATION | National Retail vs. Sims Metal Management | National Retail vs. Coor Service Management |
| SOUTHWEST AIRLINES vs. RETAIL FOOD GROUP | SOUTHWEST AIRLINES vs. SPARTAN STORES | SOUTHWEST AIRLINES vs. National Retail Properties | SOUTHWEST AIRLINES vs. DeVry Education Group |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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