Correlation Between Southwest Airlines and BCE
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and BCE 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 BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and BCE Inc, you can compare the effects of market volatilities on Southwest Airlines and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and BCE.
Diversification Opportunities for Southwest Airlines and BCE
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and BCE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and BCE go up and down completely randomly.
Pair Corralation between Southwest Airlines and BCE
Considering the 90-day investment horizon Southwest Airlines is expected to generate 25.86 times less return on investment than BCE. In addition to that, Southwest Airlines is 3.63 times more volatile than BCE Inc. It trades about 0.0 of its total potential returns per unit of risk. BCE Inc is currently generating about 0.03 per unit of volatility. If you would invest 1,015 in BCE Inc on August 30, 2024 and sell it today you would earn a total of 85.00 from holding BCE Inc or generate 8.37% 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. BCE Inc
Performance |
| Timeline |
| Southwest Airlines |
| BCE Inc |
Southwest Airlines and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and BCE
The main advantage of trading using opposite Southwest Airlines and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. SkyWest | Southwest Airlines vs. International Consolidated Airlines |
| BCE vs. Marsh McLennan Companies | BCE vs. MGIC Investment Corp | BCE vs. Southwest Airlines | BCE vs. GoHealth |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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