Correlation Between SOUTHWEST AIRLINES and Seres Therapeutics
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and Seres Therapeutics 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 Seres Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and Seres Therapeutics, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and Seres Therapeutics 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 Seres Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and Seres Therapeutics.
Diversification Opportunities for SOUTHWEST AIRLINES and Seres Therapeutics
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SOUTHWEST and Seres is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and Seres Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seres Therapeutics 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 are associated (or correlated) with Seres Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seres Therapeutics has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and Seres Therapeutics go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and Seres Therapeutics
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.68 times less return on investment than Seres Therapeutics. But when comparing it to its historical volatility, SOUTHWEST AIRLINES is 3.49 times less risky than Seres Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Seres Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 97.00 in Seres Therapeutics on September 14, 2024 and sell it today you would lose (13.00) from holding Seres Therapeutics or give up 13.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. Seres Therapeutics
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| Seres Therapeutics |
SOUTHWEST AIRLINES and Seres Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and Seres Therapeutics
The main advantage of trading using opposite SOUTHWEST AIRLINES and Seres Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, Seres Therapeutics 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 Seres Therapeutics will offset losses from the drop in Seres Therapeutics' long position.| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc |
| Seres Therapeutics vs. Perseus Mining Limited | Seres Therapeutics vs. SOUTHWEST AIRLINES | Seres Therapeutics vs. DISTRICT METALS | Seres Therapeutics vs. CHINA TONTINE WINES |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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