Correlation Between Southwest Airlines and First Majestic
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and First Majestic 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 First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and First Majestic Silver, you can compare the effects of market volatilities on Southwest Airlines and First Majestic 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 First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and First Majestic.
Diversification Opportunities for Southwest Airlines and First Majestic
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and First is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and First Majestic go up and down completely randomly.
Pair Corralation between Southwest Airlines and First Majestic
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 2.33 times more return on investment than First Majestic. However, Southwest Airlines is 2.33 times more volatile than First Majestic Silver. It trades about 0.17 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.37 per unit of risk. If you would invest 62,200 in Southwest Airlines on September 1, 2024 and sell it today you would earn a total of 3,520 from holding Southwest Airlines or generate 5.66% 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. First Majestic Silver
Performance |
| Timeline |
| Southwest Airlines |
| First Majestic Silver |
Southwest Airlines and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and First Majestic
The main advantage of trading using opposite Southwest Airlines and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. The Select Sector | Southwest Airlines vs. Promotora y Operadora | Southwest Airlines vs. SPDR Series Trust |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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