Correlation Between Southwest Airlines and Aimfinity Investment

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Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Aimfinity Investment 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 Aimfinity Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Aimfinity Investment I, you can compare the effects of market volatilities on Southwest Airlines and Aimfinity Investment 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 Aimfinity Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Aimfinity Investment.

Diversification Opportunities for Southwest Airlines and Aimfinity Investment

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Southwest and Aimfinity is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Aimfinity Investment I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aimfinity Investment 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 Aimfinity Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aimfinity Investment has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Aimfinity Investment go up and down completely randomly.

Pair Corralation between Southwest Airlines and Aimfinity Investment

Considering the 90-day investment horizon Southwest Airlines is expected to generate 2.36 times more return on investment than Aimfinity Investment. However, Southwest Airlines is 2.36 times more volatile than Aimfinity Investment I. It trades about 0.13 of its potential returns per unit of risk. Aimfinity Investment I is currently generating about 0.29 per unit of risk. If you would invest  3,238  in Southwest Airlines on September 14, 2024 and sell it today you would earn a total of  120.00  from holding Southwest Airlines or generate 3.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Southwest Airlines  vs.  Aimfinity Investment I

 Performance 
       Timeline  
Southwest Airlines 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Southwest Airlines showed solid returns over the last few months and may actually be approaching a breakup point.
Aimfinity Investment 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aimfinity Investment I are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Aimfinity Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Southwest Airlines and Aimfinity Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwest Airlines and Aimfinity Investment

The main advantage of trading using opposite Southwest Airlines and Aimfinity Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Aimfinity Investment 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 Aimfinity Investment will offset losses from the drop in Aimfinity Investment's long position.
The idea behind Southwest Airlines and Aimfinity Investment I 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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