Correlation Between GP Investments and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both GP Investments 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 GP Investments and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GP Investments and Southwest Airlines Co, you can compare the effects of market volatilities on GP Investments 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 GP Investments with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and Southwest Airlines.
Diversification Opportunities for GP Investments and Southwest Airlines
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GPIV33 and Southwest is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding GP 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 GP Investments 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 GP 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 GP Investments i.e., GP Investments and Southwest Airlines go up and down completely randomly.
Pair Corralation between GP Investments and Southwest Airlines
Assuming the 90 days trading horizon GP Investments is expected to generate 1.12 times more return on investment than Southwest Airlines. However, GP Investments is 1.12 times more volatile than Southwest Airlines Co. It trades about 0.04 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.0 per unit of risk. If you would invest 285.00 in GP Investments on August 30, 2024 and sell it today you would earn a total of 108.00 from holding GP Investments or generate 37.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 74.24% |
| Values | Daily Returns |
GP Investments vs. Southwest Airlines Co
Performance |
| Timeline |
| GP Investments |
| Southwest Airlines |
GP Investments and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GP Investments and Southwest Airlines
The main advantage of trading using opposite GP Investments and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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.| GP Investments vs. Global X Funds | GP Investments vs. American Airlines Group | GP Investments vs. Southwest Airlines Co | GP Investments vs. Unity Software |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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