Correlation Between Southwest Airlines and Global Crossing
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Global Crossing 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 Global Crossing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Global Crossing Airlines, you can compare the effects of market volatilities on Southwest Airlines and Global Crossing 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 Global Crossing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Global Crossing.
Diversification Opportunities for Southwest Airlines and Global Crossing
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Global is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Global Crossing Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Crossing 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 Global Crossing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Crossing Airlines has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Global Crossing go up and down completely randomly.
Pair Corralation between Southwest Airlines and Global Crossing
Considering the 90-day investment horizon Southwest Airlines is expected to under-perform the Global Crossing. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines is 2.86 times less risky than Global Crossing. The stock trades about -0.13 of its potential returns per unit of risk. The Global Crossing Airlines is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Global Crossing Airlines on October 21, 2024 and sell it today you would earn a total of 6.00 from holding Global Crossing Airlines or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Global Crossing Airlines
Performance |
| Timeline |
| Southwest Airlines |
| Global Crossing Airlines |
Southwest Airlines and Global Crossing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Global Crossing
The main advantage of trading using opposite Southwest Airlines and Global Crossing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Global Crossing 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 Global Crossing will offset losses from the drop in Global Crossing'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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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