Correlation Between SOUTHWEST AIRLINES and SYSTEMAIR
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and SYSTEMAIR 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 SYSTEMAIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and SYSTEMAIR AB, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and SYSTEMAIR 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 SYSTEMAIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and SYSTEMAIR.
Diversification Opportunities for SOUTHWEST AIRLINES and SYSTEMAIR
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between SOUTHWEST and SYSTEMAIR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and SYSTEMAIR go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and SYSTEMAIR
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.03 times more return on investment than SYSTEMAIR. However, SOUTHWEST AIRLINES is 1.03 times more volatile than SYSTEMAIR AB. It trades about 0.15 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.11 per unit of risk. If you would invest 2,567 in SOUTHWEST AIRLINES on August 30, 2024 and sell it today you would earn a total of 490.00 from holding SOUTHWEST AIRLINES or generate 19.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. SYSTEMAIR AB
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| SYSTEMAIR AB |
SOUTHWEST AIRLINES and SYSTEMAIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and SYSTEMAIR
The main advantage of trading using opposite SOUTHWEST AIRLINES and SYSTEMAIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, SYSTEMAIR 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 SYSTEMAIR will offset losses from the drop in SYSTEMAIR's long position.| SOUTHWEST AIRLINES vs. TIANDE CHEMICAL | SOUTHWEST AIRLINES vs. WESTLAKE CHEMICAL | SOUTHWEST AIRLINES vs. CVW CLEANTECH INC | SOUTHWEST AIRLINES vs. Mitsui Chemicals |
| SYSTEMAIR vs. HANOVER INSURANCE | SYSTEMAIR vs. Benchmark Electronics | SYSTEMAIR vs. UMC Electronics Co | SYSTEMAIR vs. Direct Line Insurance |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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