Correlation Between Keurig Dr and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Keurig Dr 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 Keurig Dr and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keurig Dr Pepper and Southwest Airlines, you can compare the effects of market volatilities on Keurig Dr 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 Keurig Dr with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig Dr and Southwest Airlines.
Diversification Opportunities for Keurig Dr and Southwest Airlines
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Keurig and Southwest is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and Southwest Airlines go up and down completely randomly.
Pair Corralation between Keurig Dr and Southwest Airlines
Considering the 90-day investment horizon Keurig Dr is expected to generate 3.83 times less return on investment than Southwest Airlines. But when comparing it to its historical volatility, Keurig Dr Pepper is 2.1 times less risky than Southwest Airlines. It trades about 0.03 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,454 in Southwest Airlines on September 14, 2024 and sell it today you would earn a total of 848.00 from holding Southwest Airlines or generate 34.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keurig Dr Pepper vs. Southwest Airlines
Performance |
| Timeline |
| Keurig Dr Pepper |
| Southwest Airlines |
Keurig Dr and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keurig Dr and Southwest Airlines
The main advantage of trading using opposite Keurig Dr and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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.| Keurig Dr vs. Coca Cola Femsa SAB | Keurig Dr vs. Embotelladora Andina SA | Keurig Dr vs. Coca Cola European Partners | Keurig Dr vs. Coca Cola Consolidated |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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