Correlation Between Schneider National and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Schneider National 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 Schneider National and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schneider National and Southwest Airlines, you can compare the effects of market volatilities on Schneider National 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 Schneider National with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider National and Southwest Airlines.
Diversification Opportunities for Schneider National and Southwest Airlines
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schneider and Southwest is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Schneider National and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Schneider National 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 Schneider National 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 Schneider National i.e., Schneider National and Southwest Airlines go up and down completely randomly.
Pair Corralation between Schneider National and Southwest Airlines
Given the investment horizon of 90 days Schneider National is expected to generate 1.07 times more return on investment than Southwest Airlines. However, Schneider National is 1.07 times more volatile than Southwest Airlines. It trades about 0.4 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.13 per unit of risk. If you would invest 2,843 in Schneider National on August 30, 2024 and sell it today you would earn a total of 442.00 from holding Schneider National or generate 15.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schneider National vs. Southwest Airlines
Performance |
| Timeline |
| Schneider National |
| Southwest Airlines |
Schneider National and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schneider National and Southwest Airlines
The main advantage of trading using opposite Schneider National and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider National 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.| Schneider National vs. Marten Transport | Schneider National vs. Heartland Express | Schneider National vs. Universal Logistics Holdings | Schneider National vs. Covenant Logistics Group, |
| 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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