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 Co, 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
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Samsung and Southwest is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Southwest Airlines Co 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 is expected to generate 6.82 times less return on investment than Southwest Airlines. In addition to that, Samsung Electronics is 1.44 times more volatile than Southwest Airlines Co. It trades about 0.03 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.29 per unit of volatility. If you would invest 2,724 in Southwest Airlines Co on August 27, 2024 and sell it today you would earn a total of 364.00 from holding Southwest Airlines Co or generate 13.36% 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 Co
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. Samsung Electronics Co | Samsung Electronics vs. Microsoft | Samsung Electronics vs. Tencent Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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