Correlation Between Southwest Airlines and Aluminum
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Aluminum 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 Aluminum 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 Aluminum of, you can compare the effects of market volatilities on Southwest Airlines and Aluminum 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 Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Aluminum.
Diversification Opportunities for Southwest Airlines and Aluminum
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and Aluminum is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Aluminum go up and down completely randomly.
Pair Corralation between Southwest Airlines and Aluminum
Assuming the 90 days horizon Southwest Airlines is expected to generate 17.33 times less return on investment than Aluminum. But when comparing it to its historical volatility, Southwest Airlines Co is 1.65 times less risky than Aluminum. It trades about 0.01 of its potential returns per unit of risk. Aluminum of is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 31.00 in Aluminum of on October 28, 2024 and sell it today you would earn a total of 32.00 from holding Aluminum of or generate 103.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Aluminum of
Performance |
| Timeline |
| Southwest Airlines |
| Aluminum |
Southwest Airlines and Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Aluminum
The main advantage of trading using opposite Southwest Airlines and Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Aluminum 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 Aluminum will offset losses from the drop in Aluminum's long position.| Southwest Airlines vs. Easy Software AG | Southwest Airlines vs. SPORT LISBOA E | Southwest Airlines vs. Align Technology | Southwest Airlines vs. Computershare Limited |
| Aluminum vs. ARDAGH METAL PACDL 0001 | Aluminum vs. SERI INDUSTRIAL EO | Aluminum vs. LOANDEPOT INC A | Aluminum vs. Global Ship Lease |
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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