Correlation Between Southwest Airlines and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Cathay Pacific 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 Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Cathay Pacific Airways, you can compare the effects of market volatilities on Southwest Airlines and Cathay Pacific 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 Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Cathay Pacific.
Diversification Opportunities for Southwest Airlines and Cathay Pacific
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southwest and Cathay is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Cathay Pacific Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Pacific Airways 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 Cathay Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Pacific Airways has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Cathay Pacific go up and down completely randomly.
Pair Corralation between Southwest Airlines and Cathay Pacific
Considering the 90-day investment horizon Southwest Airlines is expected to generate 2.39 times more return on investment than Cathay Pacific. However, Southwest Airlines is 2.39 times more volatile than Cathay Pacific Airways. It trades about 0.12 of its potential returns per unit of risk. Cathay Pacific Airways is currently generating about 0.22 per unit of risk. If you would invest 2,851 in Southwest Airlines on August 28, 2024 and sell it today you would earn a total of 392.00 from holding Southwest Airlines or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 31.25% |
| Values | Daily Returns |
Southwest Airlines vs. Cathay Pacific Airways
Performance |
| Timeline |
| Southwest Airlines |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Southwest Airlines and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Cathay Pacific
The main advantage of trading using opposite Southwest Airlines and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Cathay Pacific 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 Cathay Pacific will offset losses from the drop in Cathay Pacific'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 |
| Cathay Pacific vs. Finnair Oyj | Cathay Pacific vs. easyJet plc | Cathay Pacific vs. Norse Atlantic ASA | Cathay Pacific vs. Air New Zealand |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |