Correlation Between Southwest Airlines and Aldel Financial
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Aldel Financial 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 Aldel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Aldel Financial II, you can compare the effects of market volatilities on Southwest Airlines and Aldel Financial 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 Aldel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Aldel Financial.
Diversification Opportunities for Southwest Airlines and Aldel Financial
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and Aldel is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II 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 Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Aldel Financial go up and down completely randomly.
Pair Corralation between Southwest Airlines and Aldel Financial
Considering the 90-day investment horizon Southwest Airlines is expected to generate 21.02 times more return on investment than Aldel Financial. However, Southwest Airlines is 21.02 times more volatile than Aldel Financial II. It trades about 0.03 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.07 per unit of risk. If you would invest 2,878 in Southwest Airlines on September 19, 2024 and sell it today you would earn a total of 403.00 from holding Southwest Airlines or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 10.2% |
| Values | Daily Returns |
Southwest Airlines vs. Aldel Financial II
Performance |
| Timeline |
| Southwest Airlines |
| Aldel Financial II |
Southwest Airlines and Aldel Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Aldel Financial
The main advantage of trading using opposite Southwest Airlines and Aldel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Aldel Financial 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 Aldel Financial will offset losses from the drop in Aldel Financial's long position.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Delta Air Lines |
| Aldel Financial vs. Centessa Pharmaceuticals PLC | Aldel Financial vs. Southwest Airlines | Aldel Financial vs. Sun Country Airlines | Aldel Financial vs. Ardelyx |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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