Correlation Between Southwest Airlines and SLR Investment
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and SLR 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 SLR 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 SLR Investment Corp, you can compare the effects of market volatilities on Southwest Airlines and SLR 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 SLR Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and SLR Investment.
Diversification Opportunities for Southwest Airlines and SLR Investment
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and SLR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and SLR Investment go up and down completely randomly.
Pair Corralation between Southwest Airlines and SLR Investment
Assuming the 90 days horizon Southwest Airlines is expected to generate 2.02 times less return on investment than SLR Investment. But when comparing it to its historical volatility, Southwest Airlines Co is 1.02 times less risky than SLR Investment. It trades about 0.13 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,412 in SLR Investment Corp on August 31, 2024 and sell it today you would earn a total of 158.00 from holding SLR Investment Corp or generate 11.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. SLR Investment Corp
Performance |
| Timeline |
| Southwest Airlines |
| SLR Investment Corp |
Southwest Airlines and SLR Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and SLR Investment
The main advantage of trading using opposite Southwest Airlines and SLR Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, SLR 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 SLR Investment will offset losses from the drop in SLR Investment's long position.| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. NMI Holdings | Southwest Airlines vs. Origin Agritech |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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