Correlation Between DFS Furniture and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both DFS Furniture 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 DFS Furniture and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DFS Furniture PLC and Southwest Airlines Co, you can compare the effects of market volatilities on DFS Furniture 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 DFS Furniture with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Southwest Airlines.
Diversification Opportunities for DFS Furniture and Southwest Airlines
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DFS and Southwest is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and DFS Furniture 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 DFS Furniture PLC 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 DFS Furniture i.e., DFS Furniture and Southwest Airlines go up and down completely randomly.
Pair Corralation between DFS Furniture and Southwest Airlines
Assuming the 90 days trading horizon DFS Furniture is expected to generate 1.21 times less return on investment than Southwest Airlines. In addition to that, DFS Furniture is 1.21 times more volatile than Southwest Airlines Co. It trades about 0.03 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.05 per unit of volatility. If you would invest 2,588 in Southwest Airlines Co on October 16, 2024 and sell it today you would earn a total of 630.00 from holding Southwest Airlines Co or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DFS Furniture PLC vs. Southwest Airlines Co
Performance |
| Timeline |
| DFS Furniture PLC |
| Southwest Airlines |
DFS Furniture and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Southwest Airlines
The main advantage of trading using opposite DFS Furniture and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture 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.| DFS Furniture vs. Japan Tobacco | DFS Furniture vs. Siamgas And Petrochemicals | DFS Furniture vs. The Yokohama Rubber | DFS Furniture vs. SOLSTAD OFFSHORE NK |
| Southwest Airlines vs. Corporate Travel Management | Southwest Airlines vs. Austevoll Seafood ASA | Southwest Airlines vs. Perdoceo Education | Southwest Airlines vs. Cleanaway Waste Management |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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