Correlation Between Southwest Airlines and SNDL
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and SNDL 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 SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and SNDL Inc, you can compare the effects of market volatilities on Southwest Airlines and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and SNDL.
Diversification Opportunities for Southwest Airlines and SNDL
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southwest and SNDL is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and SNDL go up and down completely randomly.
Pair Corralation between Southwest Airlines and SNDL
Considering the 90-day investment horizon Southwest Airlines is expected to generate 1.02 times less return on investment than SNDL. But when comparing it to its historical volatility, Southwest Airlines is 1.83 times less risky than SNDL. It trades about 0.06 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 153.00 in SNDL Inc on September 14, 2024 and sell it today you would earn a total of 24.50 from holding SNDL Inc or generate 16.01% 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. SNDL Inc
Performance |
| Timeline |
| Southwest Airlines |
| SNDL Inc |
Southwest Airlines and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and SNDL
The main advantage of trading using opposite Southwest Airlines and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL'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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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