Correlation Between Southwest Airlines and Platinum Investment
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Platinum Investment 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 Platinum Investment 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 Platinum Investment Management, you can compare the effects of market volatilities on Southwest Airlines and Platinum Investment 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 Platinum Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Platinum Investment.
Diversification Opportunities for Southwest Airlines and Platinum Investment
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Platinum is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment 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 Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Platinum Investment go up and down completely randomly.
Pair Corralation between Southwest Airlines and Platinum Investment
Assuming the 90 days horizon Southwest Airlines is expected to generate 1.96 times less return on investment than Platinum Investment. But when comparing it to its historical volatility, Southwest Airlines Co is 2.15 times less risky than Platinum Investment. It trades about 0.14 of its potential returns per unit of risk. Platinum Investment Management is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Platinum Investment Management on October 16, 2024 and sell it today you would earn a total of 2.00 from holding Platinum Investment Management or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Platinum Investment Management
Performance |
| Timeline |
| Southwest Airlines |
| Platinum Investment |
Southwest Airlines and Platinum Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Platinum Investment
The main advantage of trading using opposite Southwest Airlines and Platinum Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Platinum Investment 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 Platinum Investment will offset losses from the drop in Platinum Investment's long position.| Southwest Airlines vs. Corporate Travel Management | Southwest Airlines vs. Austevoll Seafood ASA | Southwest Airlines vs. Perdoceo Education | Southwest Airlines vs. Cleanaway Waste Management |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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