Correlation Between Southwest Airlines and LG Display
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and LG Display 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 LG Display 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 LG Display Co, you can compare the effects of market volatilities on Southwest Airlines and LG Display 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 LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and LG Display.
Diversification Opportunities for Southwest Airlines and LG Display
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and LGA is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and LG Display go up and down completely randomly.
Pair Corralation between Southwest Airlines and LG Display
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 0.87 times more return on investment than LG Display. However, Southwest Airlines Co is 1.15 times less risky than LG Display. It trades about 0.02 of its potential returns per unit of risk. LG Display Co is currently generating about -0.02 per unit of risk. If you would invest 2,954 in Southwest Airlines Co on September 20, 2024 and sell it today you would earn a total of 156.00 from holding Southwest Airlines Co or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. LG Display Co
Performance |
| Timeline |
| Southwest Airlines |
| LG Display |
Southwest Airlines and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and LG Display
The main advantage of trading using opposite Southwest Airlines and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB | Southwest Airlines vs. Norsk Hydro ASA |
| LG Display vs. Reinsurance Group of | LG Display vs. Singapore Reinsurance | LG Display vs. INSURANCE AUST GRP | LG Display vs. Ping An Insurance |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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