Correlation Between Southwest Airlines and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and EAGLE MATERIALS 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 EAGLE MATERIALS 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 EAGLE MATERIALS, you can compare the effects of market volatilities on Southwest Airlines and EAGLE MATERIALS 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 EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and EAGLE MATERIALS.
Diversification Opportunities for Southwest Airlines and EAGLE MATERIALS
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and EAGLE is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between Southwest Airlines and EAGLE MATERIALS
Assuming the 90 days horizon Southwest Airlines Co is expected to under-perform the EAGLE MATERIALS. In addition to that, Southwest Airlines is 1.1 times more volatile than EAGLE MATERIALS. It trades about -0.21 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.11 per unit of volatility. If you would invest 24,000 in EAGLE MATERIALS on November 3, 2024 and sell it today you would earn a total of 800.00 from holding EAGLE MATERIALS or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. EAGLE MATERIALS
Performance |
| Timeline |
| Southwest Airlines |
| EAGLE MATERIALS |
Southwest Airlines and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and EAGLE MATERIALS
The main advantage of trading using opposite Southwest Airlines and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, EAGLE MATERIALS 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 EAGLE MATERIALS will offset losses from the drop in EAGLE MATERIALS's long position.| Southwest Airlines vs. Diamyd Medical AB | Southwest Airlines vs. Norwegian Air Shuttle | Southwest Airlines vs. Compugroup Medical SE | Southwest Airlines vs. SYSTEMAIR AB |
| EAGLE MATERIALS vs. CEOTRONICS | EAGLE MATERIALS vs. Air Transport Services | EAGLE MATERIALS vs. Yuexiu Transport Infrastructure | EAGLE MATERIALS vs. Transport International Holdings |
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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