Correlation Between SOUTHWEST AIRLINES and Infosys
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and Infosys 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 Infosys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and Infosys Limited, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and Infosys 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 Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and Infosys.
Diversification Opportunities for SOUTHWEST AIRLINES and Infosys
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SOUTHWEST and Infosys is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and Infosys go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and Infosys
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to under-perform the Infosys. But the stock apears to be less risky and, when comparing its historical volatility, SOUTHWEST AIRLINES is 2.08 times less risky than Infosys. The stock trades about -0.29 of its potential returns per unit of risk. The Infosys Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,080 in Infosys Limited on November 7, 2024 and sell it today you would lose (80.00) from holding Infosys Limited or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. Infosys Limited
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| Infosys Limited |
SOUTHWEST AIRLINES and Infosys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and Infosys
The main advantage of trading using opposite SOUTHWEST AIRLINES and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, Infosys 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 Infosys will offset losses from the drop in Infosys' long position.| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc |
| Infosys vs. Information Services International Dentsu | Infosys vs. Teradata Corp | Infosys vs. EITZEN CHEMICALS | Infosys vs. TIANDE 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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