Correlation Between Southwest Airlines and Amgen
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Amgen 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 Southwest Airlines and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Amgen Inc, you can compare the effects of market volatilities on Southwest Airlines and Amgen 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 Southwest Airlines with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Amgen.
Diversification Opportunities for Southwest Airlines and Amgen
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and Amgen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Southwest Airlines 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 Southwest Airlines are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Amgen go up and down completely randomly.
Pair Corralation between Southwest Airlines and Amgen
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 0.51 times more return on investment than Amgen. However, Southwest Airlines is 1.95 times less risky than Amgen. It trades about 0.13 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.11 per unit of risk. If you would invest 62,999 in Southwest Airlines on August 31, 2024 and sell it today you would earn a total of 2,721 from holding Southwest Airlines or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Amgen Inc
Performance |
| Timeline |
| Southwest Airlines |
| Amgen Inc |
Southwest Airlines and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Amgen
The main advantage of trading using opposite Southwest Airlines and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. The Select Sector | Southwest Airlines vs. Promotora y Operadora |
| Amgen vs. Capital One Financial | Amgen vs. Ameriprise Financial | Amgen vs. KB Home | Amgen vs. Micron Technology |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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