Correlation Between Southwest Airlines and CAL MAINE
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and CAL MAINE 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 CAL MAINE 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 CAL MAINE FOODS, you can compare the effects of market volatilities on Southwest Airlines and CAL MAINE 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 CAL MAINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and CAL MAINE.
Diversification Opportunities for Southwest Airlines and CAL MAINE
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and CAL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and CAL MAINE FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAL MAINE FOODS 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 CAL MAINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAL MAINE FOODS has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and CAL MAINE go up and down completely randomly.
Pair Corralation between Southwest Airlines and CAL MAINE
Assuming the 90 days horizon Southwest Airlines is expected to generate 4.44 times less return on investment than CAL MAINE. In addition to that, Southwest Airlines is 1.05 times more volatile than CAL MAINE FOODS. It trades about 0.02 of its total potential returns per unit of risk. CAL MAINE FOODS is currently generating about 0.09 per unit of volatility. If you would invest 4,580 in CAL MAINE FOODS on September 25, 2024 and sell it today you would earn a total of 5,244 from holding CAL MAINE FOODS or generate 114.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. CAL MAINE FOODS
Performance |
| Timeline |
| Southwest Airlines |
| CAL MAINE FOODS |
Southwest Airlines and CAL MAINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and CAL MAINE
The main advantage of trading using opposite Southwest Airlines and CAL MAINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, CAL MAINE 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 CAL MAINE will offset losses from the drop in CAL MAINE's long position.| Southwest Airlines vs. CDL INVESTMENT | Southwest Airlines vs. TRAVEL LEISURE DL 01 | Southwest Airlines vs. PLAYTIKA HOLDING DL 01 | Southwest Airlines 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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