Correlation Between Southwest Airlines and Grupo Hotelero
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Grupo Hotelero 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 Grupo Hotelero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Grupo Hotelero Santa, you can compare the effects of market volatilities on Southwest Airlines and Grupo Hotelero 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 Grupo Hotelero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Grupo Hotelero.
Diversification Opportunities for Southwest Airlines and Grupo Hotelero
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southwest and Grupo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Grupo Hotelero Santa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Hotelero Santa 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 Grupo Hotelero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Hotelero Santa has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Grupo Hotelero go up and down completely randomly.
Pair Corralation between Southwest Airlines and Grupo Hotelero
Assuming the 90 days trading horizon Southwest Airlines is expected to under-perform the Grupo Hotelero. In addition to that, Southwest Airlines is 1.38 times more volatile than Grupo Hotelero Santa. It trades about -0.2 of its total potential returns per unit of risk. Grupo Hotelero Santa is currently generating about -0.21 per unit of volatility. If you would invest 400.00 in Grupo Hotelero Santa on November 28, 2024 and sell it today you would lose (25.00) from holding Grupo Hotelero Santa or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Grupo Hotelero Santa
Performance |
| Timeline |
| Southwest Airlines |
| Grupo Hotelero Santa |
Southwest Airlines and Grupo Hotelero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Grupo Hotelero
The main advantage of trading using opposite Southwest Airlines and Grupo Hotelero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Grupo Hotelero 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 Grupo Hotelero will offset losses from the drop in Grupo Hotelero's long position.| Southwest Airlines vs. Burlington Stores | Southwest Airlines vs. Capital One Financial | Southwest Airlines vs. Desarrolladora Homex SAB | Southwest Airlines vs. DXC Technology |
| Grupo Hotelero vs. Air Transport Services | Grupo Hotelero vs. Samsung Electronics Co | Grupo Hotelero vs. First Republic Bank | Grupo Hotelero vs. Genworth Financial |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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