Correlation Between Southwest Airlines and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and China BlueChemical 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 China BlueChemical 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 China BlueChemical, you can compare the effects of market volatilities on Southwest Airlines and China BlueChemical 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 China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and China BlueChemical.
Diversification Opportunities for Southwest Airlines and China BlueChemical
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and China is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and China BlueChemical go up and down completely randomly.
Pair Corralation between Southwest Airlines and China BlueChemical
Assuming the 90 days horizon Southwest Airlines Co is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, Southwest Airlines Co is 3.41 times less risky than China BlueChemical. The stock trades about -0.09 of its potential returns per unit of risk. The China BlueChemical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 24.00 in China BlueChemical on October 24, 2024 and sell it today you would earn a total of 2.00 from holding China BlueChemical or generate 8.33% 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. China BlueChemical
Performance |
| Timeline |
| Southwest Airlines |
| China BlueChemical |
Southwest Airlines and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and China BlueChemical
The main advantage of trading using opposite Southwest Airlines and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.| Southwest Airlines vs. KOBE STEEL LTD | Southwest Airlines vs. Forsys Metals Corp | Southwest Airlines vs. SOLSTAD OFFSHORE NK | Southwest Airlines vs. Calibre Mining Corp |
| China BlueChemical vs. Clean Energy Fuels | China BlueChemical vs. Texas Roadhouse | China BlueChemical vs. Gaztransport Technigaz SA | China BlueChemical vs. Commercial Vehicle Group |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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