Correlation Between Sphere Entertainment and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Sphere Entertainment 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 Sphere Entertainment and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sphere Entertainment Co and Southwest Airlines, you can compare the effects of market volatilities on Sphere Entertainment 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 Sphere Entertainment with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Southwest Airlines.
Diversification Opportunities for Sphere Entertainment and Southwest Airlines
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sphere and Southwest is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Sphere Entertainment 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 Sphere Entertainment 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 Sphere Entertainment i.e., Sphere Entertainment and Southwest Airlines go up and down completely randomly.
Pair Corralation between Sphere Entertainment and Southwest Airlines
Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.46 times more return on investment than Southwest Airlines. However, Sphere Entertainment is 1.46 times more volatile than Southwest Airlines. It trades about 0.06 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.02 per unit of risk. If you would invest 2,559 in Sphere Entertainment Co on August 31, 2024 and sell it today you would earn a total of 1,556 from holding Sphere Entertainment Co or generate 60.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Sphere Entertainment Co vs. Southwest Airlines
Performance |
| Timeline |
| Sphere Entertainment |
| Southwest Airlines |
Sphere Entertainment and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sphere Entertainment and Southwest Airlines
The main advantage of trading using opposite Sphere Entertainment and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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.| Sphere Entertainment vs. Ihuman Inc | Sphere Entertainment vs. GoHealth | Sphere Entertainment vs. Aspen Insurance Holdings | Sphere Entertainment vs. Relx PLC ADR |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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