Correlation Between Southwest Airlines and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Olympic Steel 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 Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Olympic Steel, you can compare the effects of market volatilities on Southwest Airlines and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Olympic Steel.
Diversification Opportunities for Southwest Airlines and Olympic Steel
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Olympic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Olympic Steel go up and down completely randomly.
Pair Corralation between Southwest Airlines and Olympic Steel
Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.87 times more return on investment than Olympic Steel. However, Southwest Airlines is 1.15 times less risky than Olympic Steel. It trades about 0.02 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.01 per unit of risk. If you would invest 3,099 in Southwest Airlines on September 12, 2024 and sell it today you would earn a total of 258.50 from holding Southwest Airlines or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. Olympic Steel
Performance |
| Timeline |
| Southwest Airlines |
| Olympic Steel |
Southwest Airlines and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Olympic Steel
The main advantage of trading using opposite Southwest Airlines and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel'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 |
| Olympic Steel vs. Universal Stainless Alloy | Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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