Correlation Between Southwest Airlines and Avient Corp
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Avient Corp 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 Avient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Avient Corp, you can compare the effects of market volatilities on Southwest Airlines and Avient Corp 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 Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Avient Corp.
Diversification Opportunities for Southwest Airlines and Avient Corp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Avient is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Avient Corp go up and down completely randomly.
Pair Corralation between Southwest Airlines and Avient Corp
Considering the 90-day investment horizon Southwest Airlines is expected to generate 2.36 times less return on investment than Avient Corp. In addition to that, Southwest Airlines is 1.18 times more volatile than Avient Corp. It trades about 0.02 of its total potential returns per unit of risk. Avient Corp is currently generating about 0.06 per unit of volatility. If you would invest 3,559 in Avient Corp on September 12, 2024 and sell it today you would earn a total of 1,373 from holding Avient Corp or generate 38.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Avient Corp
Performance |
| Timeline |
| Southwest Airlines |
| Avient Corp |
Southwest Airlines and Avient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Avient Corp
The main advantage of trading using opposite Southwest Airlines and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Avient Corp 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 Avient Corp will offset losses from the drop in Avient Corp'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 |
| Avient Corp vs. Griffon | Avient Corp vs. Merck Company | Avient Corp vs. Brinker International | Avient Corp vs. Alcoa Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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