Correlation Between Southwest Airlines and Yihai International
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Yihai International 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 Yihai International 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 Yihai International Holding, you can compare the effects of market volatilities on Southwest Airlines and Yihai International 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 Yihai International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Yihai International.
Diversification Opportunities for Southwest Airlines and Yihai International
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Southwest and Yihai is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Yihai International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yihai International 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 Yihai International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yihai International has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Yihai International go up and down completely randomly.
Pair Corralation between Southwest Airlines and Yihai International
Assuming the 90 days horizon Southwest Airlines is expected to generate 7.68 times less return on investment than Yihai International. But when comparing it to its historical volatility, Southwest Airlines Co is 2.49 times less risky than Yihai International. It trades about 0.01 of its potential returns per unit of risk. Yihai International Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 112.00 in Yihai International Holding on September 14, 2024 and sell it today you would earn a total of 76.00 from holding Yihai International Holding or generate 67.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Yihai International Holding
Performance |
| Timeline |
| Southwest Airlines |
| Yihai International |
Southwest Airlines and Yihai International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Yihai International
The main advantage of trading using opposite Southwest Airlines and Yihai International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Yihai International 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 Yihai International will offset losses from the drop in Yihai International's 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 |
| Yihai International vs. Fair Isaac Corp | Yihai International vs. UNITED UTILITIES GR | Yihai International vs. SOGECLAIR SA INH | Yihai International vs. HF SINCLAIR P |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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