Correlation Between JetBlue Airways and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both JetBlue Airways 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 JetBlue Airways and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JetBlue Airways and Southwest Airlines, you can compare the effects of market volatilities on JetBlue Airways 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 JetBlue Airways with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of JetBlue Airways and Southwest Airlines.
Diversification Opportunities for JetBlue Airways and Southwest Airlines
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between JetBlue and Southwest is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and JetBlue Airways 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 JetBlue Airways 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 JetBlue Airways i.e., JetBlue Airways and Southwest Airlines go up and down completely randomly.
Pair Corralation between JetBlue Airways and Southwest Airlines
Assuming the 90 days trading horizon JetBlue Airways is expected to generate 1.87 times more return on investment than Southwest Airlines. However, JetBlue Airways is 1.87 times more volatile than Southwest Airlines. It trades about 0.05 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.06 per unit of risk. If you would invest 9,819 in JetBlue Airways on November 3, 2024 and sell it today you would earn a total of 4,081 from holding JetBlue Airways or generate 41.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JetBlue Airways vs. Southwest Airlines
Performance |
| Timeline |
| JetBlue Airways |
| Southwest Airlines |
JetBlue Airways and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JetBlue Airways and Southwest Airlines
The main advantage of trading using opposite JetBlue Airways and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways 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.| JetBlue Airways vs. Grupo Sports World | JetBlue Airways vs. Verizon Communications | JetBlue Airways vs. Cognizant Technology Solutions | JetBlue Airways vs. The Home Depot |
| Southwest Airlines vs. Genworth Financial | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. KB Home | Southwest Airlines vs. The Bank of |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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