Correlation Between Southwest Airlines and SENECA FOODS-A
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and SENECA FOODS-A 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 SENECA FOODS-A 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 SENECA FOODS A, you can compare the effects of market volatilities on Southwest Airlines and SENECA FOODS-A 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 SENECA FOODS-A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and SENECA FOODS-A.
Diversification Opportunities for Southwest Airlines and SENECA FOODS-A
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and SENECA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and SENECA FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENECA FOODS A 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 SENECA FOODS-A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SENECA FOODS A has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and SENECA FOODS-A go up and down completely randomly.
Pair Corralation between Southwest Airlines and SENECA FOODS-A
Assuming the 90 days horizon Southwest Airlines is expected to generate 2.35 times less return on investment than SENECA FOODS-A. But when comparing it to its historical volatility, Southwest Airlines Co is 1.14 times less risky than SENECA FOODS-A. It trades about 0.13 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,500 in SENECA FOODS A on August 24, 2024 and sell it today you would earn a total of 900.00 from holding SENECA FOODS A or generate 16.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Southwest Airlines Co vs. SENECA FOODS A
Performance |
| Timeline |
| Southwest Airlines |
| SENECA FOODS A |
Southwest Airlines and SENECA FOODS-A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and SENECA FOODS-A
The main advantage of trading using opposite Southwest Airlines and SENECA FOODS-A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, SENECA FOODS-A 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 SENECA FOODS-A will offset losses from the drop in SENECA FOODS-A's long position.| Southwest Airlines vs. MAVEN WIRELESS SWEDEN | Southwest Airlines vs. KRISPY KREME DL 01 | Southwest Airlines vs. Infrastrutture Wireless Italiane | Southwest Airlines vs. CENTURIA OFFICE REIT |
| SENECA FOODS-A vs. Chunghwa Telecom Co | SENECA FOODS-A vs. ScanSource | SENECA FOODS-A vs. Coor Service Management | SENECA FOODS-A vs. Cogent Communications Holdings |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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