Correlation Between Southwest Airlines and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Lion Biotechnologies 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 Southwest Airlines and Lion Biotechnologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines Co and Lion Biotechnologies, you can compare the effects of market volatilities on Southwest Airlines and Lion Biotechnologies 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 Southwest Airlines with a short position of Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Lion Biotechnologies.
Diversification Opportunities for Southwest Airlines and Lion Biotechnologies
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Lion is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies and Southwest Airlines 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 Southwest Airlines Co are associated (or correlated) with Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between Southwest Airlines and Lion Biotechnologies
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.15 times more return on investment than Lion Biotechnologies. However, Southwest Airlines is 1.15 times more volatile than Lion Biotechnologies. It trades about -0.08 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about -0.31 per unit of risk. If you would invest 2,649 in Southwest Airlines Co on January 9, 2025 and sell it today you would lose (279.00) from holding Southwest Airlines Co or give up 10.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Southwest Airlines Co vs. Lion Biotechnologies
Performance |
| Timeline |
| Southwest Airlines |
| Lion Biotechnologies |
Southwest Airlines and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Lion Biotechnologies
The main advantage of trading using opposite Southwest Airlines and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| Southwest Airlines vs. GLG LIFE TECH | Southwest Airlines vs. Sunny Optical Technology | Southwest Airlines vs. CanSino Biologics | Southwest Airlines vs. Tencent Music Entertainment |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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