Correlation Between Premier Foods and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and Southwest Airlines Co, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Southwest Airlines.
Diversification Opportunities for Premier Foods and Southwest Airlines
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Premier and Southwest is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and Southwest Airlines go up and down completely randomly.
Pair Corralation between Premier Foods and Southwest Airlines
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.51 times more return on investment than Southwest Airlines. However, Premier Foods PLC is 1.95 times less risky than Southwest Airlines. It trades about 0.07 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.01 per unit of risk. If you would invest 15,417 in Premier Foods PLC on December 2, 2024 and sell it today you would earn a total of 2,963 from holding Premier Foods PLC or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.4% |
| Values | Daily Returns |
Premier Foods PLC vs. Southwest Airlines Co
Performance |
| Timeline |
| Premier Foods PLC |
| Southwest Airlines |
Premier Foods and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Southwest Airlines
The main advantage of trading using opposite Premier Foods and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. Ondine Biomedical | Premier Foods vs. Hochschild Mining plc | Premier Foods vs. Empire Metals Limited | Premier Foods vs. First Class Metals |
| Southwest Airlines vs. BlackRock Frontiers Investment | Southwest Airlines vs. Resolute Mining Limited | Southwest Airlines vs. Edinburgh Investment Trust | Southwest Airlines vs. Hansa Investment |
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 CEOs Directory module to screen CEOs from public companies around the world.
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