Correlation Between SOUTHWEST AIRLINES and Canon
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and Canon 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 Canon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and Canon Inc, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and Canon 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 Canon. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and Canon.
Diversification Opportunities for SOUTHWEST AIRLINES and Canon
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SOUTHWEST and Canon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and Canon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc 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 Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and Canon go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and Canon
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to under-perform the Canon. In addition to that, SOUTHWEST AIRLINES is 1.07 times more volatile than Canon Inc. It trades about 0.0 of its total potential returns per unit of risk. Canon Inc is currently generating about 0.05 per unit of volatility. If you would invest 1,912 in Canon Inc on September 3, 2024 and sell it today you would earn a total of 1,088 from holding Canon Inc or generate 56.9% 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 vs. Canon Inc
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| Canon Inc |
SOUTHWEST AIRLINES and Canon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and Canon
The main advantage of trading using opposite SOUTHWEST AIRLINES and Canon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, Canon 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 Canon will offset losses from the drop in Canon's long position.| SOUTHWEST AIRLINES vs. MCEWEN MINING INC | SOUTHWEST AIRLINES vs. GALENA MINING LTD | SOUTHWEST AIRLINES vs. Apollo Investment Corp | SOUTHWEST AIRLINES vs. SLR Investment Corp |
| Canon vs. SOUTHWEST AIRLINES | Canon vs. CVS Health | Canon vs. ON SEMICONDUCTOR | Canon vs. SINGAPORE AIRLINES |
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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