Correlation Between Southwest Airlines and Atacado SA
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Atacado SA 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 Atacado SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Atacado SA, you can compare the effects of market volatilities on Southwest Airlines and Atacado SA 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 Atacado SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Atacado SA.
Diversification Opportunities for Southwest Airlines and Atacado SA
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Atacado is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Atacado SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atacado SA 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 Atacado SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atacado SA has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Atacado SA go up and down completely randomly.
Pair Corralation between Southwest Airlines and Atacado SA
If you would invest 2,991 in Southwest Airlines on September 4, 2024 and sell it today you would earn a total of 309.00 from holding Southwest Airlines or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Southwest Airlines vs. Atacado SA
Performance |
| Timeline |
| Southwest Airlines |
| Atacado SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southwest Airlines and Atacado SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Atacado SA
The main advantage of trading using opposite Southwest Airlines and Atacado SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Atacado SA 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 Atacado SA will offset losses from the drop in Atacado SA's long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. Frontier Group Holdings |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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