Correlation Between Southwest Airlines and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and The Coca Cola, you can compare the effects of market volatilities on Southwest Airlines and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Coca Cola.
Diversification Opportunities for Southwest Airlines and Coca Cola
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Coca is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Coca Cola go up and down completely randomly.
Pair Corralation between Southwest Airlines and Coca Cola
Considering the 90-day investment horizon Southwest Airlines is expected to generate 3.87 times less return on investment than Coca Cola. In addition to that, Southwest Airlines is 2.64 times more volatile than The Coca Cola. It trades about 0.0 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.02 per unit of volatility. If you would invest 6,019 in The Coca Cola on September 4, 2024 and sell it today you would earn a total of 346.00 from holding The Coca Cola or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. The Coca Cola
Performance |
| Timeline |
| Southwest Airlines |
| Coca Cola |
Southwest Airlines and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Coca Cola
The main advantage of trading using opposite Southwest Airlines and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. Frontier Group Holdings |
| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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