Correlation Between Southwest Airlines and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and CapitaLand Investment 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 CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and CapitaLand Investment Limited, you can compare the effects of market volatilities on Southwest Airlines and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and CapitaLand Investment.
Diversification Opportunities for Southwest Airlines and CapitaLand Investment
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and CapitaLand is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and CapitaLand Investment go up and down completely randomly.
Pair Corralation between Southwest Airlines and CapitaLand Investment
Considering the 90-day investment horizon Southwest Airlines is expected to generate 1.38 times less return on investment than CapitaLand Investment. But when comparing it to its historical volatility, Southwest Airlines is 2.27 times less risky than CapitaLand Investment. It trades about 0.03 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 193.00 in CapitaLand Investment Limited on September 2, 2024 and sell it today you would lose (11.00) from holding CapitaLand Investment Limited or give up 5.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. CapitaLand Investment Limited
Performance |
| Timeline |
| Southwest Airlines |
| CapitaLand Investment |
Southwest Airlines and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and CapitaLand Investment
The main advantage of trading using opposite Southwest Airlines and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment'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 |
| CapitaLand Investment vs. IRSA Inversiones Y | CapitaLand Investment vs. Anywhere Real Estate | CapitaLand Investment vs. Newmark Group | CapitaLand Investment vs. New York City |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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