Correlation Between Southwest Airlines and Big 5
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on Southwest Airlines and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Big 5.
Diversification Opportunities for Southwest Airlines and Big 5
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southwest and Big is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Big 5 go up and down completely randomly.
Pair Corralation between Southwest Airlines and Big 5
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 0.43 times more return on investment than Big 5. However, Southwest Airlines Co is 2.34 times less risky than Big 5. It trades about 0.08 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.02 per unit of risk. If you would invest 3,083 in Southwest Airlines Co on September 13, 2024 and sell it today you would earn a total of 79.00 from holding Southwest Airlines Co or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Southwest Airlines Co vs. Big 5 Sporting
Performance |
| Timeline |
| Southwest Airlines |
| Big 5 Sporting |
Southwest Airlines and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Big 5
The main advantage of trading using opposite Southwest Airlines and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Ryanair Holdings plc | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB |
| Big 5 vs. Superior Plus Corp | Big 5 vs. SIVERS SEMICONDUCTORS AB | Big 5 vs. NorAm Drilling AS | Big 5 vs. Norsk Hydro ASA |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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