Correlation Between Southwest Airlines and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and The Goldman Sachs, you can compare the effects of market volatilities on Southwest Airlines and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Goldman Sachs.
Diversification Opportunities for Southwest Airlines and Goldman Sachs
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Goldman is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Goldman Sachs go up and down completely randomly.
Pair Corralation between Southwest Airlines and Goldman Sachs
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 1.36 times more return on investment than Goldman Sachs. However, Southwest Airlines is 1.36 times more volatile than The Goldman Sachs. It trades about 0.08 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.03 per unit of risk. If you would invest 65,781 in Southwest Airlines on September 13, 2024 and sell it today you would earn a total of 2,219 from holding Southwest Airlines or generate 3.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Southwest Airlines vs. The Goldman Sachs
Performance |
| Timeline |
| Southwest Airlines |
| Goldman Sachs |
Southwest Airlines and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Goldman Sachs
The main advantage of trading using opposite Southwest Airlines and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. Controladora Vuela Compaa |
| Goldman Sachs vs. New Oriental Education | Goldman Sachs vs. Ameriprise Financial | Goldman Sachs vs. FibraHotel | Goldman Sachs vs. Grupo Hotelero Santa |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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