Correlation Between Southwest Airlines and Companhia Siderrgica
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Companhia Siderrgica 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 Companhia Siderrgica 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 Companhia Siderrgica Nacional, you can compare the effects of market volatilities on Southwest Airlines and Companhia Siderrgica 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 Companhia Siderrgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Companhia Siderrgica.
Diversification Opportunities for Southwest Airlines and Companhia Siderrgica
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and Companhia is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Companhia Siderrgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderrgica 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 Companhia Siderrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderrgica has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Companhia Siderrgica go up and down completely randomly.
Pair Corralation between Southwest Airlines and Companhia Siderrgica
If you would invest 1,120 in Companhia Siderrgica Nacional on August 30, 2024 and sell it today you would lose (1.00) from holding Companhia Siderrgica Nacional or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Southwest Airlines Co vs. Companhia Siderrgica Nacional
Performance |
| Timeline |
| Southwest Airlines |
| Companhia Siderrgica |
Southwest Airlines and Companhia Siderrgica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Companhia Siderrgica
The main advantage of trading using opposite Southwest Airlines and Companhia Siderrgica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Companhia Siderrgica 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 Companhia Siderrgica will offset losses from the drop in Companhia Siderrgica's long position.The idea behind Southwest Airlines Co and Companhia Siderrgica Nacional 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.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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