Correlation Between Southwest Airlines and DAX Index
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By analyzing existing cross correlation between Southwest Airlines Co and DAX Index, you can compare the effects of market volatilities on Southwest Airlines and DAX Index 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 DAX Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and DAX Index.
Diversification Opportunities for Southwest Airlines and DAX Index
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and DAX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and DAX Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX Index 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 DAX Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAX Index has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and DAX Index go up and down completely randomly.
Pair Corralation between Southwest Airlines and DAX Index
Assuming the 90 days horizon Southwest Airlines is expected to generate 2.13 times less return on investment than DAX Index. In addition to that, Southwest Airlines is 2.66 times more volatile than DAX Index. It trades about 0.01 of its total potential returns per unit of risk. DAX Index is currently generating about 0.08 per unit of volatility. If you would invest 1,479,283 in DAX Index on September 30, 2024 and sell it today you would earn a total of 519,149 from holding DAX Index or generate 35.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. DAX Index
Performance |
| Timeline |
Southwest Airlines and DAX Index Volatility Contrast
Predicted Return Density |
| Returns |
Southwest Airlines Co
Pair trading matchups for Southwest Airlines
DAX Index
Pair trading matchups for DAX Index
Pair Trading with Southwest Airlines and DAX Index
The main advantage of trading using opposite Southwest Airlines and DAX Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, DAX Index 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 DAX Index will offset losses from the drop in DAX Index's long position.| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. Air China Limited | Southwest Airlines vs. AIR CHINA LTD | Southwest Airlines vs. RYANAIR HLDGS ADR |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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