Correlation Between Southwest Airlines and Entain Plc
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Entain Plc 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 Entain Plc 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 Entain Plc, you can compare the effects of market volatilities on Southwest Airlines and Entain Plc 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 Entain Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Entain Plc.
Diversification Opportunities for Southwest Airlines and Entain Plc
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Entain is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Entain Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain Plc 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 Entain Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain Plc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Entain Plc go up and down completely randomly.
Pair Corralation between Southwest Airlines and Entain Plc
Assuming the 90 days horizon Southwest Airlines is expected to generate 1.94 times less return on investment than Entain Plc. But when comparing it to its historical volatility, Southwest Airlines Co is 1.44 times less risky than Entain Plc. It trades about 0.13 of its potential returns per unit of risk. Entain Plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 724.00 in Entain Plc on September 4, 2024 and sell it today you would earn a total of 242.00 from holding Entain Plc or generate 33.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Entain Plc
Performance |
| Timeline |
| Southwest Airlines |
| Entain Plc |
Southwest Airlines and Entain Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Entain Plc
The main advantage of trading using opposite Southwest Airlines and Entain Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Entain Plc 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 Entain Plc will offset losses from the drop in Entain Plc's long position.| Southwest Airlines vs. Perseus Mining Limited | Southwest Airlines vs. TITANIUM TRANSPORTGROUP | Southwest Airlines vs. Thai Beverage Public | Southwest Airlines vs. Dairy Farm International |
| Entain Plc vs. Wyndham Hotels Resorts | Entain Plc vs. Meli Hotels International | Entain Plc vs. Southwest Airlines Co | Entain Plc vs. Playa Hotels Resorts |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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