Correlation Between Southwest Airlines and DigiAsia Corp
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and DigiAsia Corp 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 DigiAsia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and DigiAsia Corp, you can compare the effects of market volatilities on Southwest Airlines and DigiAsia Corp 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 DigiAsia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and DigiAsia Corp.
Diversification Opportunities for Southwest Airlines and DigiAsia Corp
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and DigiAsia is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and DigiAsia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiAsia Corp 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 DigiAsia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiAsia Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and DigiAsia Corp go up and down completely randomly.
Pair Corralation between Southwest Airlines and DigiAsia Corp
Considering the 90-day investment horizon Southwest Airlines is expected to generate 135.51 times less return on investment than DigiAsia Corp. But when comparing it to its historical volatility, Southwest Airlines is 10.29 times less risky than DigiAsia Corp. It trades about 0.01 of its potential returns per unit of risk. DigiAsia Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5.20 in DigiAsia Corp on September 13, 2024 and sell it today you would earn a total of 2.30 from holding DigiAsia Corp or generate 44.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.32% |
| Values | Daily Returns |
Southwest Airlines vs. DigiAsia Corp
Performance |
| Timeline |
| Southwest Airlines |
| DigiAsia Corp |
Southwest Airlines and DigiAsia Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and DigiAsia Corp
The main advantage of trading using opposite Southwest Airlines and DigiAsia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, DigiAsia Corp 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 DigiAsia Corp will offset losses from the drop in DigiAsia Corp'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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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