Correlation Between Western Asset and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Investment and Southwest Airlines, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Southwest Airlines.
Diversification Opportunities for Western Asset and Southwest Airlines
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Southwest is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and Southwest Airlines go up and down completely randomly.
Pair Corralation between Western Asset and Southwest Airlines
Considering the 90-day investment horizon Western Asset Investment is expected to generate 0.21 times more return on investment than Southwest Airlines. However, Western Asset Investment is 4.77 times less risky than Southwest Airlines. It trades about 0.1 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.02 per unit of risk. If you would invest 1,660 in Western Asset Investment on September 20, 2024 and sell it today you would earn a total of 10.00 from holding Western Asset Investment or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Investment vs. Southwest Airlines
Performance |
| Timeline |
| Western Asset Investment |
| Southwest Airlines |
Western Asset and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Southwest Airlines
The main advantage of trading using opposite Western Asset and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Delta Air Lines |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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