Correlation Between EHEALTH and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both EHEALTH 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 EHEALTH and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EHEALTH and Southwest Airlines Co, you can compare the effects of market volatilities on EHEALTH 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 EHEALTH with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of EHEALTH and Southwest Airlines.
Diversification Opportunities for EHEALTH and Southwest Airlines
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EHEALTH and Southwest is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and EHEALTH 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 EHEALTH 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 EHEALTH i.e., EHEALTH and Southwest Airlines go up and down completely randomly.
Pair Corralation between EHEALTH and Southwest Airlines
Assuming the 90 days trading horizon EHEALTH is expected to under-perform the Southwest Airlines. In addition to that, EHEALTH is 1.94 times more volatile than Southwest Airlines Co. It trades about -0.01 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.04 per unit of volatility. If you would invest 2,653 in Southwest Airlines Co on September 4, 2024 and sell it today you would earn a total of 414.00 from holding Southwest Airlines Co or generate 15.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EHEALTH vs. Southwest Airlines Co
Performance |
| Timeline |
| EHEALTH |
| Southwest Airlines |
EHEALTH and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EHEALTH and Southwest Airlines
The main advantage of trading using opposite EHEALTH and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EHEALTH 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.The idea behind EHEALTH and Southwest Airlines Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Southwest Airlines vs. Perseus Mining Limited | Southwest Airlines vs. TITANIUM TRANSPORTGROUP | Southwest Airlines vs. Thai Beverage Public | Southwest Airlines vs. Dairy Farm International |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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