Correlation Between Sun Life and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Sun Life and Southwest Airlines 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 Sun Life and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Life Financial and Southwest Airlines, you can compare the effects of market volatilities on Sun Life and Southwest Airlines 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 Sun Life with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Southwest Airlines.
Diversification Opportunities for Sun Life and Southwest Airlines
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sun and Southwest is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Sun Life 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 Sun Life Financial are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Sun Life i.e., Sun Life and Southwest Airlines go up and down completely randomly.
Pair Corralation between Sun Life and Southwest Airlines
Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.44 times more return on investment than Southwest Airlines. However, Sun Life Financial is 2.25 times less risky than Southwest Airlines. It trades about 0.09 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.03 per unit of risk. If you would invest 4,890 in Sun Life Financial on September 2, 2024 and sell it today you would earn a total of 1,249 from holding Sun Life Financial or generate 25.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Southwest Airlines
Performance |
| Timeline |
| Sun Life Financial |
| Southwest Airlines |
Sun Life and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Southwest Airlines
The main advantage of trading using opposite Sun Life and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Sun Life vs. Axa Equitable Holdings | Sun Life vs. American International Group | Sun Life vs. Arch Capital Group | Sun Life vs. Old Republic International |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Delta Air Lines |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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