Correlation Between SPORT LISBOA and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both SPORT LISBOA and Southwest Airlines 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 SPORT LISBOA and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORT LISBOA E and Southwest Airlines Co, you can compare the effects of market volatilities on SPORT LISBOA and Southwest Airlines 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 SPORT LISBOA with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and Southwest Airlines.
Diversification Opportunities for SPORT LISBOA and Southwest Airlines
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SPORT and Southwest is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and SPORT LISBOA 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 SPORT LISBOA E are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and Southwest Airlines go up and down completely randomly.
Pair Corralation between SPORT LISBOA and Southwest Airlines
Assuming the 90 days horizon SPORT LISBOA E is expected to generate 1.48 times more return on investment than Southwest Airlines. However, SPORT LISBOA is 1.48 times more volatile than Southwest Airlines Co. It trades about -0.14 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.23 per unit of risk. If you would invest 333.00 in SPORT LISBOA E on November 6, 2024 and sell it today you would lose (25.00) from holding SPORT LISBOA E or give up 7.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPORT LISBOA E vs. Southwest Airlines Co
Performance |
| Timeline |
| SPORT LISBOA E |
| Southwest Airlines |
SPORT LISBOA and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORT LISBOA and Southwest Airlines
The main advantage of trading using opposite SPORT LISBOA and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| SPORT LISBOA vs. GALENA MINING LTD | SPORT LISBOA vs. Perseus Mining Limited | SPORT LISBOA vs. CORNISH METALS INC | SPORT LISBOA vs. Calibre Mining Corp |
| Southwest Airlines vs. Cardinal Health | Southwest Airlines vs. OPKO HEALTH | Southwest Airlines vs. Waste Management | Southwest Airlines vs. Neinor Homes SA |
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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