Correlation Between Southwest Airlines and Grupo Sports
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Grupo Sports 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 Sports 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 Sports World, you can compare the effects of market volatilities on Southwest Airlines and Grupo Sports 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 Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Grupo Sports.
Diversification Opportunities for Southwest Airlines and Grupo Sports
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Grupo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Grupo Sports World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Sports World 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 Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Sports World has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Grupo Sports go up and down completely randomly.
Pair Corralation between Southwest Airlines and Grupo Sports
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 45.95 times less return on investment than Grupo Sports. In addition to that, Southwest Airlines is 1.03 times more volatile than Grupo Sports World. It trades about 0.0 of its total potential returns per unit of risk. Grupo Sports World is currently generating about 0.08 per unit of volatility. If you would invest 290.00 in Grupo Sports World on August 28, 2024 and sell it today you would earn a total of 350.00 from holding Grupo Sports World or generate 120.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Grupo Sports World
Performance |
| Timeline |
| Southwest Airlines |
| Grupo Sports World |
Southwest Airlines and Grupo Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Grupo Sports
The main advantage of trading using opposite Southwest Airlines and Grupo Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Grupo Sports 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 Sports will offset losses from the drop in Grupo Sports' long position.The idea behind Southwest Airlines and Grupo Sports World pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Grupo Sports vs. Taiwan Semiconductor Manufacturing | Grupo Sports vs. Alibaba Group Holding | Grupo Sports vs. The Select Sector | Grupo Sports vs. Promotora y Operadora |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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