Correlation Between Southwest Airlines and Inmobiliaria Colonial

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Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Inmobiliaria Colonial 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 Inmobiliaria Colonial 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 Inmobiliaria Colonial SOCIMI, you can compare the effects of market volatilities on Southwest Airlines and Inmobiliaria Colonial 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 Inmobiliaria Colonial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Inmobiliaria Colonial.

Diversification Opportunities for Southwest Airlines and Inmobiliaria Colonial

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Southwest and Inmobiliaria is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Inmobiliaria Colonial SOCIMI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inmobiliaria Colonial 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 Inmobiliaria Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inmobiliaria Colonial has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Inmobiliaria Colonial go up and down completely randomly.

Pair Corralation between Southwest Airlines and Inmobiliaria Colonial

Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.23 times more return on investment than Inmobiliaria Colonial. However, Southwest Airlines is 1.23 times more volatile than Inmobiliaria Colonial SOCIMI. It trades about 0.0 of its potential returns per unit of risk. Inmobiliaria Colonial SOCIMI is currently generating about 0.0 per unit of risk. If you would invest  3,390  in Southwest Airlines Co on September 5, 2024 and sell it today you would lose (253.00) from holding Southwest Airlines Co or give up 7.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Southwest Airlines Co  vs.  Inmobiliaria Colonial SOCIMI

 Performance 
       Timeline  
Southwest Airlines 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Southwest Airlines reported solid returns over the last few months and may actually be approaching a breakup point.
Inmobiliaria Colonial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Inmobiliaria Colonial SOCIMI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Southwest Airlines and Inmobiliaria Colonial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwest Airlines and Inmobiliaria Colonial

The main advantage of trading using opposite Southwest Airlines and Inmobiliaria Colonial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Inmobiliaria Colonial 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 Inmobiliaria Colonial will offset losses from the drop in Inmobiliaria Colonial's long position.
The idea behind Southwest Airlines Co and Inmobiliaria Colonial SOCIMI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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