Correlation Between Southwest Airlines and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and MidCap Financial 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 MidCap Financial 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 MidCap Financial Investment, you can compare the effects of market volatilities on Southwest Airlines and MidCap Financial 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 MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and MidCap Financial.
Diversification Opportunities for Southwest Airlines and MidCap Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southwest and MidCap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and MidCap Financial go up and down completely randomly.
Pair Corralation between Southwest Airlines and MidCap Financial
Assuming the 90 days horizon Southwest Airlines is expected to generate 4.2 times less return on investment than MidCap Financial. In addition to that, Southwest Airlines is 1.61 times more volatile than MidCap Financial Investment. It trades about 0.01 of its total potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.07 per unit of volatility. If you would invest 863.00 in MidCap Financial Investment on October 11, 2024 and sell it today you would earn a total of 414.00 from holding MidCap Financial Investment or generate 47.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. MidCap Financial Investment
Performance |
| Timeline |
| Southwest Airlines |
| MidCap Financial Inv |
Southwest Airlines and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and MidCap Financial
The main advantage of trading using opposite Southwest Airlines and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, MidCap Financial 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 MidCap Financial will offset losses from the drop in MidCap Financial's long position.| Southwest Airlines vs. Corporate Office Properties | Southwest Airlines vs. UNITED RENTALS | Southwest Airlines vs. Nanjing Panda Electronics | Southwest Airlines vs. ALBIS LEASING AG |
| MidCap Financial vs. Southwest Airlines Co | MidCap Financial vs. Singapore Airlines Limited | MidCap Financial vs. GRENKELEASING Dusseldorf | MidCap Financial vs. JAPAN AIRLINES |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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