Correlation Between Southwest Airlines and Check Point
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on Southwest Airlines and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Check Point.
Diversification Opportunities for Southwest Airlines and Check Point
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and Check is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Check Point go up and down completely randomly.
Pair Corralation between Southwest Airlines and Check Point
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 0.71 times more return on investment than Check Point. However, Southwest Airlines Co is 1.41 times less risky than Check Point. It trades about 0.13 of its potential returns per unit of risk. Check Point Software is currently generating about -0.11 per unit of risk. If you would invest 2,808 in Southwest Airlines Co on August 24, 2024 and sell it today you would earn a total of 188.00 from holding Southwest Airlines Co or generate 6.7% 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. Check Point Software
Performance |
| Timeline |
| Southwest Airlines |
| Check Point Software |
Southwest Airlines and Check Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Check Point
The main advantage of trading using opposite Southwest Airlines and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.| Southwest Airlines vs. MAVEN WIRELESS SWEDEN | Southwest Airlines vs. KRISPY KREME DL 01 | Southwest Airlines vs. Infrastrutture Wireless Italiane | Southwest Airlines vs. CENTURIA OFFICE REIT |
| Check Point vs. Clean Energy Fuels | Check Point vs. InterContinental Hotels Group | Check Point vs. Regal Hotels International | Check Point vs. ALERION CLEANPOWER |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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