Correlation Between Southwest Airlines and Visa
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Visa Inc, you can compare the effects of market volatilities on Southwest Airlines and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Visa.
Diversification Opportunities for Southwest Airlines and Visa
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Visa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Visa go up and down completely randomly.
Pair Corralation between Southwest Airlines and Visa
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 1.4 times less return on investment than Visa. In addition to that, Southwest Airlines is 1.26 times more volatile than Visa Inc. It trades about 0.24 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.42 per unit of volatility. If you would invest 567,031 in Visa Inc on August 28, 2024 and sell it today you would earn a total of 82,969 from holding Visa Inc or generate 14.63% 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. Visa Inc
Performance |
| Timeline |
| Southwest Airlines |
| Visa Inc |
Southwest Airlines and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Visa
The main advantage of trading using opposite Southwest Airlines and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Southwest Airlines vs. First Republic Bank | Southwest Airlines vs. Grupo Sports World | Southwest Airlines vs. Cognizant Technology Solutions | Southwest Airlines vs. UnitedHealth Group Incorporated |
| Visa vs. Verizon Communications | Visa vs. Capital One Financial | Visa vs. Prudential Financial | Visa vs. First Republic Bank |
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.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |