Correlation Between SOUTHWEST AIRLINES and FORWARD AIR
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and FORWARD AIR 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 FORWARD AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and FORWARD AIR P, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and FORWARD AIR 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 FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and FORWARD AIR.
Diversification Opportunities for SOUTHWEST AIRLINES and FORWARD AIR
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SOUTHWEST and FORWARD is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and FORWARD AIR go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and FORWARD AIR
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.31 times less return on investment than FORWARD AIR. But when comparing it to its historical volatility, SOUTHWEST AIRLINES is 2.47 times less risky than FORWARD AIR. It trades about 0.15 of its potential returns per unit of risk. FORWARD AIR P is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,840 in FORWARD AIR P on August 31, 2024 and sell it today you would earn a total of 540.00 from holding FORWARD AIR P or generate 19.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. FORWARD AIR P
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| FORWARD AIR P |
SOUTHWEST AIRLINES and FORWARD AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and FORWARD AIR
The main advantage of trading using opposite SOUTHWEST AIRLINES and FORWARD AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, FORWARD AIR 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 FORWARD AIR will offset losses from the drop in FORWARD AIR's long position.| SOUTHWEST AIRLINES vs. TIANDE CHEMICAL | SOUTHWEST AIRLINES vs. WESTLAKE CHEMICAL | SOUTHWEST AIRLINES vs. CVW CLEANTECH INC | SOUTHWEST AIRLINES vs. Mitsui Chemicals |
| FORWARD AIR vs. Data3 Limited | FORWARD AIR vs. PLAYTIKA HOLDING DL 01 | FORWARD AIR vs. DOCDATA | FORWARD AIR vs. CNVISION MEDIA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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