Correlation Between Southwest Airlines and BOS Better
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and BOS Better 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 BOS Better into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and BOS Better Online, you can compare the effects of market volatilities on Southwest Airlines and BOS Better 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 BOS Better. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and BOS Better.
Diversification Opportunities for Southwest Airlines and BOS Better
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and BOS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and BOS Better Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOS Better Online 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 BOS Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOS Better Online has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and BOS Better go up and down completely randomly.
Pair Corralation between Southwest Airlines and BOS Better
Considering the 90-day investment horizon Southwest Airlines is expected to under-perform the BOS Better. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines is 2.63 times less risky than BOS Better. The stock trades about -0.22 of its potential returns per unit of risk. The BOS Better Online is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 328.00 in BOS Better Online on October 25, 2024 and sell it today you would earn a total of 58.00 from holding BOS Better Online or generate 17.68% 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. BOS Better Online
Performance |
| Timeline |
| Southwest Airlines |
| BOS Better Online |
Southwest Airlines and BOS Better Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and BOS Better
The main advantage of trading using opposite Southwest Airlines and BOS Better positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, BOS Better 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 BOS Better will offset losses from the drop in BOS Better'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 |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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