Correlation Between Southwest Airlines and Easy Software
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Easy Software 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 Easy Software 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 Easy Software AG, you can compare the effects of market volatilities on Southwest Airlines and Easy Software 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 Easy Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Easy Software.
Diversification Opportunities for Southwest Airlines and Easy Software
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and Easy is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Easy Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easy Software AG 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 Easy Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easy Software AG has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Easy Software go up and down completely randomly.
Pair Corralation between Southwest Airlines and Easy Software
Assuming the 90 days horizon Southwest Airlines Co is expected to under-perform the Easy Software. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 2.0 times less risky than Easy Software. The stock trades about -0.23 of its potential returns per unit of risk. The Easy Software AG is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Easy Software AG on November 5, 2024 and sell it today you would lose (50.00) from holding Easy Software AG or give up 2.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Easy Software AG
Performance |
| Timeline |
| Southwest Airlines |
| Easy Software AG |
Southwest Airlines and Easy Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Easy Software
The main advantage of trading using opposite Southwest Airlines and Easy Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Easy Software 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 Easy Software will offset losses from the drop in Easy Software's long position.| Southwest Airlines vs. CDL INVESTMENT | Southwest Airlines vs. New Residential Investment | Southwest Airlines vs. SLR Investment Corp | Southwest Airlines vs. Lendlease Group |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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