Correlation Between Southwest Airlines and ING Groep
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and ING Groep 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 ING Groep into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and ING Groep NV, you can compare the effects of market volatilities on Southwest Airlines and ING Groep 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 ING Groep. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and ING Groep.
Diversification Opportunities for Southwest Airlines and ING Groep
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and ING is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and ING Groep NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Groep NV 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 ING Groep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Groep NV has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and ING Groep go up and down completely randomly.
Pair Corralation between Southwest Airlines and ING Groep
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 4.33 times less return on investment than ING Groep. But when comparing it to its historical volatility, Southwest Airlines is 1.03 times less risky than ING Groep. It trades about 0.01 of its potential returns per unit of risk. ING Groep NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,736 in ING Groep NV on September 12, 2024 and sell it today you would earn a total of 9,964 from holding ING Groep NV or generate 67.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. ING Groep NV
Performance |
| Timeline |
| Southwest Airlines |
| ING Groep NV |
Southwest Airlines and ING Groep Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and ING Groep
The main advantage of trading using opposite Southwest Airlines and ING Groep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, ING Groep 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 ING Groep will offset losses from the drop in ING Groep's long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. Controladora Vuela Compaa |
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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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