Correlation Between Southwest Airlines and China Southern
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and China Southern 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 China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and China Southern Airlines, you can compare the effects of market volatilities on Southwest Airlines and China Southern 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 China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and China Southern.
Diversification Opportunities for Southwest Airlines and China Southern
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southwest and China is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and China Southern go up and down completely randomly.
Pair Corralation between Southwest Airlines and China Southern
Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.31 times more return on investment than China Southern. However, Southwest Airlines is 3.26 times less risky than China Southern. It trades about 0.01 of its potential returns per unit of risk. China Southern Airlines is currently generating about -0.01 per unit of risk. If you would invest 3,209 in Southwest Airlines on November 19, 2024 and sell it today you would lose (181.00) from holding Southwest Airlines or give up 5.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 39.11% |
| Values | Daily Returns |
Southwest Airlines vs. China Southern Airlines
Performance |
| Timeline |
| Southwest Airlines |
| China Southern Airlines |
Southwest Airlines and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and China Southern
The main advantage of trading using opposite Southwest Airlines and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern'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 |
| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |