Correlation Between Southwest Airlines and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Nasdaq Inc, you can compare the effects of market volatilities on Southwest Airlines and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Nasdaq.
Diversification Opportunities for Southwest Airlines and Nasdaq
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Nasdaq is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Nasdaq go up and down completely randomly.
Pair Corralation between Southwest Airlines and Nasdaq
Considering the 90-day investment horizon Southwest Airlines is expected to generate 1.93 times less return on investment than Nasdaq. In addition to that, Southwest Airlines is 1.58 times more volatile than Nasdaq Inc. It trades about 0.19 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.58 per unit of volatility. If you would invest 7,432 in Nasdaq Inc on September 2, 2024 and sell it today you would earn a total of 867.00 from holding Nasdaq Inc or generate 11.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Nasdaq Inc
Performance |
| Timeline |
| Southwest Airlines |
| Nasdaq Inc |
Southwest Airlines and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Nasdaq
The main advantage of trading using opposite Southwest Airlines and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq'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 |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |