Correlation Between Southwest Airlines and Assured Guaranty
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Assured Guaranty 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 Assured Guaranty 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 Assured Guaranty, you can compare the effects of market volatilities on Southwest Airlines and Assured Guaranty 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 Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Assured Guaranty.
Diversification Opportunities for Southwest Airlines and Assured Guaranty
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Assured is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty 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 Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Assured Guaranty go up and down completely randomly.
Pair Corralation between Southwest Airlines and Assured Guaranty
Assuming the 90 days horizon Southwest Airlines Co is expected to under-perform the Assured Guaranty. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 2.19 times less risky than Assured Guaranty. The stock trades about -0.21 of its potential returns per unit of risk. The Assured Guaranty is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,300 in Assured Guaranty on November 4, 2024 and sell it today you would earn a total of 350.00 from holding Assured Guaranty or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Assured Guaranty
Performance |
| Timeline |
| Southwest Airlines |
| Assured Guaranty |
Southwest Airlines and Assured Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Assured Guaranty
The main advantage of trading using opposite Southwest Airlines and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Assured Guaranty 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 Assured Guaranty will offset losses from the drop in Assured Guaranty's long position.| Southwest Airlines vs. Cleanaway Waste Management | Southwest Airlines vs. Grupo Carso SAB | Southwest Airlines vs. Benchmark Electronics | Southwest Airlines vs. STMICROELECTRONICS |
| Assured Guaranty vs. SALESFORCE INC CDR | Assured Guaranty vs. Gladstone Investment | Assured Guaranty vs. HK Electric Investments | Assured Guaranty vs. New Residential Investment |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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