Correlation Between Southwest Airlines and BEST
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and BEST 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 BEST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and BEST Inc, you can compare the effects of market volatilities on Southwest Airlines and BEST 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 BEST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and BEST.
Diversification Opportunities for Southwest Airlines and BEST
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and BEST is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and BEST Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEST 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 BEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEST Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and BEST go up and down completely randomly.
Pair Corralation between Southwest Airlines and BEST
Considering the 90-day investment horizon Southwest Airlines is expected to under-perform the BEST. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines is 1.6 times less risky than BEST. The stock trades about 0.0 of its potential returns per unit of risk. The BEST Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 264.00 in BEST Inc on August 27, 2024 and sell it today you would earn a total of 2.00 from holding BEST Inc or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. BEST Inc
Performance |
| Timeline |
| Southwest Airlines |
| BEST Inc |
Southwest Airlines and BEST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and BEST
The main advantage of trading using opposite Southwest Airlines and BEST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, BEST 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 BEST will offset losses from the drop in BEST's long position.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
| BEST vs. Heartland Express | BEST vs. Universal Logistics Holdings | BEST vs. Marten Transport | BEST vs. Werner Enterprises |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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