Correlation Between Southwest Airlines and Air Transport
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Air Transport 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 Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Air Transport Services, you can compare the effects of market volatilities on Southwest Airlines and Air Transport 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 Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Air Transport.
Diversification Opportunities for Southwest Airlines and Air Transport
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Air is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Air Transport go up and down completely randomly.
Pair Corralation between Southwest Airlines and Air Transport
Considering the 90-day investment horizon Southwest Airlines is expected to generate 4.59 times less return on investment than Air Transport. But when comparing it to its historical volatility, Southwest Airlines is 1.52 times less risky than Air Transport. It trades about 0.0 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,507 in Air Transport Services on November 2, 2024 and sell it today you would lose (281.50) from holding Air Transport Services or give up 11.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Air Transport Services
Performance |
| Timeline |
| Southwest Airlines |
| Air Transport Services |
Southwest Airlines and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Air Transport
The main advantage of trading using opposite Southwest Airlines and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport'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 |
| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |