Correlation Between Southwest Airlines and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and NorAm Drilling 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 NorAm Drilling 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 NorAm Drilling AS, you can compare the effects of market volatilities on Southwest Airlines and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and NorAm Drilling.
Diversification Opportunities for Southwest Airlines and NorAm Drilling
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwest and NorAm is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and NorAm Drilling go up and down completely randomly.
Pair Corralation between Southwest Airlines and NorAm Drilling
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 0.32 times more return on investment than NorAm Drilling. However, Southwest Airlines Co is 3.15 times less risky than NorAm Drilling. It trades about -0.14 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.08 per unit of risk. If you would invest 3,086 in Southwest Airlines Co on November 22, 2024 and sell it today you would lose (176.00) from holding Southwest Airlines Co or give up 5.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. NorAm Drilling AS
Performance |
| Timeline |
| Southwest Airlines |
| NorAm Drilling AS |
Southwest Airlines and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and NorAm Drilling
The main advantage of trading using opposite Southwest Airlines and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Southwest Airlines vs. AIR PRODCHEMICALS | Southwest Airlines vs. Wayside Technology Group | Southwest Airlines vs. Check Point Software | Southwest Airlines vs. Shin Etsu Chemical Co |
| NorAm Drilling vs. CeoTronics AG | NorAm Drilling vs. Cleanaway Waste Management | NorAm Drilling vs. Vienna Insurance Group | NorAm Drilling vs. Q2M Managementberatung AG |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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