Correlation Between Procter Gamble and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Procter Gamble and Southwest Airlines Co, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Southwest Airlines.
Diversification Opportunities for Procter Gamble and Southwest Airlines
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Procter and Southwest is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Procter Gamble and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Procter Gamble 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 The Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Southwest Airlines go up and down completely randomly.
Pair Corralation between Procter Gamble and Southwest Airlines
Assuming the 90 days trading horizon The Procter Gamble is expected to generate 0.77 times more return on investment than Southwest Airlines. However, The Procter Gamble is 1.3 times less risky than Southwest Airlines. It trades about 0.16 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.07 per unit of risk. If you would invest 6,617 in The Procter Gamble on September 2, 2024 and sell it today you would earn a total of 966.00 from holding The Procter Gamble or generate 14.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Procter Gamble vs. Southwest Airlines Co
Performance |
| Timeline |
| Procter Gamble |
| Southwest Airlines |
Procter Gamble and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Southwest Airlines
The main advantage of trading using opposite Procter Gamble and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. United Rentals | Procter Gamble vs. Tyson Foods | Procter Gamble vs. salesforce inc | Procter Gamble vs. Beyond Meat |
| Southwest Airlines vs. Multilaser Industrial SA | Southwest Airlines vs. GP Investments | Southwest Airlines vs. Monster Beverage | Southwest Airlines vs. Paycom Software |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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