Correlation Between Southwest Airlines and Credit Acceptance
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Credit Acceptance 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 Credit Acceptance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines Co and Credit Acceptance, you can compare the effects of market volatilities on Southwest Airlines and Credit Acceptance 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 Credit Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Credit Acceptance.
Diversification Opportunities for Southwest Airlines and Credit Acceptance
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Co are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Credit Acceptance go up and down completely randomly.
Pair Corralation between Southwest Airlines and Credit Acceptance
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Credit Acceptance. In addition to that, Southwest Airlines is 1.34 times more volatile than Credit Acceptance. It trades about -0.01 of its total potential returns per unit of risk. Credit Acceptance is currently generating about 0.03 per unit of volatility. If you would invest 25,800 in Credit Acceptance on September 4, 2024 and sell it today you would earn a total of 6,700 from holding Credit Acceptance or generate 25.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 74.24% |
| Values | Daily Returns |
Southwest Airlines Co vs. Credit Acceptance
Performance |
| Timeline |
| Southwest Airlines |
| Credit Acceptance |
Southwest Airlines and Credit Acceptance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Credit Acceptance
The main advantage of trading using opposite Southwest Airlines and Credit Acceptance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Credit Acceptance 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 Credit Acceptance will offset losses from the drop in Credit Acceptance's long position.| Southwest Airlines vs. Take Two Interactive Software | Southwest Airlines vs. BIONTECH SE DRN | Southwest Airlines vs. Micron Technology | Southwest Airlines vs. Broadcom |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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