Correlation Between Southwest Airlines and Tyson Foods
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Tyson Foods 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 Tyson Foods 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 Tyson Foods, you can compare the effects of market volatilities on Southwest Airlines and Tyson Foods 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 Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Tyson Foods.
Diversification Opportunities for Southwest Airlines and Tyson Foods
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and Tyson is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Tyson Foods go up and down completely randomly.
Pair Corralation between Southwest Airlines and Tyson Foods
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 2.49 times less return on investment than Tyson Foods. In addition to that, Southwest Airlines is 1.26 times more volatile than Tyson Foods. It trades about 0.03 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.09 per unit of volatility. If you would invest 24,650 in Tyson Foods on September 3, 2024 and sell it today you would earn a total of 12,461 from holding Tyson Foods or generate 50.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Southwest Airlines Co vs. Tyson Foods
Performance |
| Timeline |
| Southwest Airlines |
| Tyson Foods |
Southwest Airlines and Tyson Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Tyson Foods
The main advantage of trading using opposite Southwest Airlines and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Tyson Foods 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 Tyson Foods will offset losses from the drop in Tyson Foods' long position.| Southwest Airlines vs. MAHLE Metal Leve | Southwest Airlines vs. Tres Tentos Agroindustrial | Southwest Airlines vs. Metalurgica Gerdau SA | Southwest Airlines vs. Multilaser Industrial SA |
| Tyson Foods vs. Uber Technologies | Tyson Foods vs. Metalrgica Riosulense SA | Tyson Foods vs. Waste Management | Tyson Foods vs. Take Two Interactive 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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