Correlation Between Southwest Airlines and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and BW Offshore 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 BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and BW Offshore Limited, you can compare the effects of market volatilities on Southwest Airlines and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and BW Offshore.
Diversification Opportunities for Southwest Airlines and BW Offshore
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and BWOFY is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and BW Offshore go up and down completely randomly.
Pair Corralation between Southwest Airlines and BW Offshore
Considering the 90-day investment horizon Southwest Airlines is expected to generate 1.72 times less return on investment than BW Offshore. In addition to that, Southwest Airlines is 1.52 times more volatile than BW Offshore Limited. It trades about 0.02 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about 0.04 per unit of volatility. If you would invest 459.00 in BW Offshore Limited on September 21, 2024 and sell it today you would earn a total of 96.00 from holding BW Offshore Limited or generate 20.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 80.4% |
| Values | Daily Returns |
Southwest Airlines vs. BW Offshore Limited
Performance |
| Timeline |
| Southwest Airlines |
| BW Offshore Limited |
Southwest Airlines and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and BW Offshore
The main advantage of trading using opposite Southwest Airlines and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore'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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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