Correlation Between Southwest Airlines and Warner Music
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Southwest Airlines and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Warner Music.
Diversification Opportunities for Southwest Airlines and Warner Music
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Warner is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Warner Music go up and down completely randomly.
Pair Corralation between Southwest Airlines and Warner Music
If you would invest 4,618 in Warner Music Group on September 5, 2024 and sell it today you would earn a total of 206.00 from holding Warner Music Group or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Southwest Airlines Co vs. Warner Music Group
Performance |
| Timeline |
| Southwest Airlines |
| Warner Music Group |
Southwest Airlines and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Warner Music
The main advantage of trading using opposite Southwest Airlines and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Southwest Airlines vs. Monster Beverage | Southwest Airlines vs. Electronic Arts | Southwest Airlines vs. salesforce inc | Southwest Airlines vs. Delta Air Lines |
| Warner Music vs. Deutsche Bank Aktiengesellschaft | Warner Music vs. Verizon Communications | Warner Music vs. Southwest Airlines Co | Warner Music vs. HDFC Bank Limited |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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