Correlation Between Southwest Airlines and LIFEWAY FOODS
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and LIFEWAY FOODS 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 LIFEWAY FOODS 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 LIFEWAY FOODS, you can compare the effects of market volatilities on Southwest Airlines and LIFEWAY FOODS 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 LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and LIFEWAY FOODS.
Diversification Opportunities for Southwest Airlines and LIFEWAY FOODS
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and LIFEWAY is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and LIFEWAY FOODS go up and down completely randomly.
Pair Corralation between Southwest Airlines and LIFEWAY FOODS
Assuming the 90 days horizon Southwest Airlines is expected to generate 11.3 times less return on investment than LIFEWAY FOODS. But when comparing it to its historical volatility, Southwest Airlines Co is 2.76 times less risky than LIFEWAY FOODS. It trades about 0.02 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 505.00 in LIFEWAY FOODS on September 25, 2024 and sell it today you would earn a total of 1,615 from holding LIFEWAY FOODS or generate 319.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. LIFEWAY FOODS
Performance |
| Timeline |
| Southwest Airlines |
| LIFEWAY FOODS |
Southwest Airlines and LIFEWAY FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and LIFEWAY FOODS
The main advantage of trading using opposite Southwest Airlines and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, LIFEWAY FOODS 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 LIFEWAY FOODS will offset losses from the drop in LIFEWAY FOODS's long position.| Southwest Airlines vs. CDL INVESTMENT | Southwest Airlines vs. TRAVEL LEISURE DL 01 | Southwest Airlines vs. PLAYTIKA HOLDING DL 01 | Southwest Airlines vs. Playa Hotels Resorts |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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