Correlation Between Southwest Airlines and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Japan Tobacco 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 Japan Tobacco 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 Japan Tobacco, you can compare the effects of market volatilities on Southwest Airlines and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Japan Tobacco.
Diversification Opportunities for Southwest Airlines and Japan Tobacco
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Japan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Japan Tobacco go up and down completely randomly.
Pair Corralation between Southwest Airlines and Japan Tobacco
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 0.67 times more return on investment than Japan Tobacco. However, Southwest Airlines Co is 1.49 times less risky than Japan Tobacco. It trades about -0.09 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.1 per unit of risk. If you would invest 3,162 in Southwest Airlines Co on October 24, 2024 and sell it today you would lose (58.00) from holding Southwest Airlines Co or give up 1.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Japan Tobacco
Performance |
| Timeline |
| Southwest Airlines |
| Japan Tobacco |
Southwest Airlines and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Japan Tobacco
The main advantage of trading using opposite Southwest Airlines and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco'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 |
| Japan Tobacco vs. ADDUS HOMECARE | Japan Tobacco vs. BRIT AMER TOBACCO | Japan Tobacco vs. MCEWEN MINING INC | Japan Tobacco vs. KENEDIX OFFICE INV |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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