Correlation Between Samsung Electronics and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics 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 Samsung Electronics and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Electronics Co and Southwest Airlines, you can compare the effects of market volatilities on Samsung Electronics 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 Samsung Electronics with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and Southwest Airlines.
Diversification Opportunities for Samsung Electronics and Southwest Airlines
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Samsung and Southwest is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and Southwest Airlines go up and down completely randomly.
Pair Corralation between Samsung Electronics and Southwest Airlines
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Southwest Airlines. In addition to that, Samsung Electronics is 1.25 times more volatile than Southwest Airlines. It trades about -0.13 of its total potential returns per unit of risk. Southwest Airlines is currently generating about 0.24 per unit of volatility. If you would invest 59,725 in Southwest Airlines on August 29, 2024 and sell it today you would earn a total of 5,995 from holding Southwest Airlines or generate 10.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. Southwest Airlines
Performance |
| Timeline |
| Samsung Electronics |
| Southwest Airlines |
Samsung Electronics and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and Southwest Airlines
The main advantage of trading using opposite Samsung Electronics and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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.| Samsung Electronics vs. Apple Inc | Samsung Electronics vs. The Select Sector | Samsung Electronics vs. Promotora y Operadora | Samsung Electronics vs. iShares Global Timber |
| Southwest Airlines vs. First Republic Bank | Southwest Airlines vs. Grupo Sports World | Southwest Airlines vs. Cognizant Technology Solutions | Southwest Airlines vs. UnitedHealth Group Incorporated |
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 Stocks Directory module to find actively traded stocks across global markets.
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