Correlation Between Southwest Airlines and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and NXP Semiconductors 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 NXP Semiconductors 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 NXP Semiconductors NV, you can compare the effects of market volatilities on Southwest Airlines and NXP Semiconductors 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 NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and NXP Semiconductors.
Diversification Opportunities for Southwest Airlines and NXP Semiconductors
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Southwest and NXP is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Southwest Airlines and NXP Semiconductors
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.07 times more return on investment than NXP Semiconductors. However, Southwest Airlines is 1.07 times more volatile than NXP Semiconductors NV. It trades about 0.05 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.01 per unit of risk. If you would invest 2,584 in Southwest Airlines Co on September 12, 2024 and sell it today you would earn a total of 578.00 from holding Southwest Airlines Co or generate 22.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. NXP Semiconductors NV
Performance |
| Timeline |
| Southwest Airlines |
| NXP Semiconductors |
Southwest Airlines and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and NXP Semiconductors
The main advantage of trading using opposite Southwest Airlines and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, NXP Semiconductors 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 NXP Semiconductors will offset losses from the drop in NXP Semiconductors' long position.| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Ryanair Holdings plc | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB |
| NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc | NXP Semiconductors vs. Apple Inc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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