Correlation Between Southwest Airlines and Boeing
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Boeing 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 Boeing 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 The Boeing, you can compare the effects of market volatilities on Southwest Airlines and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Boeing.
Diversification Opportunities for Southwest Airlines and Boeing
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and Boeing is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Boeing go up and down completely randomly.
Pair Corralation between Southwest Airlines and Boeing
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.06 times more return on investment than Boeing. However, Southwest Airlines is 1.06 times more volatile than The Boeing. It trades about 0.05 of its potential returns per unit of risk. The Boeing is currently generating about -0.06 per unit of risk. If you would invest 2,516 in Southwest Airlines Co on September 2, 2024 and sell it today you would earn a total of 531.00 from holding Southwest Airlines Co or generate 21.1% 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. The Boeing
Performance |
| Timeline |
| Southwest Airlines |
| Boeing |
Southwest Airlines and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Boeing
The main advantage of trading using opposite Southwest Airlines and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.| Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. NMI Holdings | Southwest Airlines vs. Origin Agritech | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB |
| Boeing vs. CNVISION MEDIA | Boeing vs. PLAYTIKA HOLDING DL 01 | Boeing vs. Beijing Media | Boeing vs. National Health Investors |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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