Correlation Between Southwest Airlines and Wix
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Wix 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 Wix 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 Wix, you can compare the effects of market volatilities on Southwest Airlines and Wix 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 Wix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Wix.
Diversification Opportunities for Southwest Airlines and Wix
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and Wix is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Wix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wix 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 Wix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wix has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Wix go up and down completely randomly.
Pair Corralation between Southwest Airlines and Wix
Assuming the 90 days trading horizon Southwest Airlines is expected to generate 14.43 times less return on investment than Wix. But when comparing it to its historical volatility, Southwest Airlines Co is 1.2 times less risky than Wix. It trades about 0.01 of its potential returns per unit of risk. Wix is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,340 in Wix on September 14, 2024 and sell it today you would earn a total of 2,962 from holding Wix or generate 221.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.04% |
| Values | Daily Returns |
Southwest Airlines Co vs. Wix
Performance |
| Timeline |
| Southwest Airlines |
| Wix |
Southwest Airlines and Wix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Wix
The main advantage of trading using opposite Southwest Airlines and Wix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Wix 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 Wix will offset losses from the drop in Wix's long position.| Southwest Airlines vs. Take Two Interactive Software | Southwest Airlines vs. Costco Wholesale | Southwest Airlines vs. Nordon Indstrias Metalrgicas | Southwest Airlines vs. Mitsubishi UFJ Financial |
| Wix vs. Arrow Electronics, | Wix vs. Paycom Software | Wix vs. NXP Semiconductors NV | Wix vs. Metalrgica Riosulense SA |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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