Correlation Between SOUTHWEST AIRLINES and GigaMedia
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and GigaMedia 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 GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and GigaMedia, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and GigaMedia 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 GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and GigaMedia.
Diversification Opportunities for SOUTHWEST AIRLINES and GigaMedia
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SOUTHWEST and GigaMedia is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia 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 GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and GigaMedia go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and GigaMedia
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 5.05 times less return on investment than GigaMedia. In addition to that, SOUTHWEST AIRLINES is 1.4 times more volatile than GigaMedia. It trades about 0.01 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.04 per unit of volatility. If you would invest 107.00 in GigaMedia on September 5, 2024 and sell it today you would earn a total of 26.00 from holding GigaMedia or generate 24.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. GigaMedia
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| GigaMedia |
SOUTHWEST AIRLINES and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and GigaMedia
The main advantage of trading using opposite SOUTHWEST AIRLINES and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, GigaMedia 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 GigaMedia will offset losses from the drop in GigaMedia's long position.| SOUTHWEST AIRLINES vs. FLOW TRADERS LTD | SOUTHWEST AIRLINES vs. CARSALESCOM | SOUTHWEST AIRLINES vs. KENNAMETAL INC | SOUTHWEST AIRLINES vs. CANON MARKETING JP |
| GigaMedia vs. VARIOUS EATERIES LS | GigaMedia vs. ETFS Coffee ETC | GigaMedia vs. North American Construction | GigaMedia vs. KINGBOARD CHEMICAL |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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