Correlation Between SOUTHWEST AIRLINES and KINGBOARD CHEMICAL
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and KINGBOARD CHEMICAL, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and KINGBOARD CHEMICAL.
Diversification Opportunities for SOUTHWEST AIRLINES and KINGBOARD CHEMICAL
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SOUTHWEST and KINGBOARD is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGBOARD CHEMICAL has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and KINGBOARD CHEMICAL go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and KINGBOARD CHEMICAL
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 10.56 times less return on investment than KINGBOARD CHEMICAL. But when comparing it to its historical volatility, SOUTHWEST AIRLINES is 1.54 times less risky than KINGBOARD CHEMICAL. It trades about 0.01 of its potential returns per unit of risk. KINGBOARD CHEMICAL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 126.00 in KINGBOARD CHEMICAL on November 5, 2024 and sell it today you would earn a total of 120.00 from holding KINGBOARD CHEMICAL or generate 95.24% 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. KINGBOARD CHEMICAL
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| KINGBOARD CHEMICAL |
SOUTHWEST AIRLINES and KINGBOARD CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and KINGBOARD CHEMICAL
The main advantage of trading using opposite SOUTHWEST AIRLINES and KINGBOARD CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL will offset losses from the drop in KINGBOARD CHEMICAL's long position.| SOUTHWEST AIRLINES vs. ARISTOCRAT LEISURE | SOUTHWEST AIRLINES vs. USWE SPORTS AB | SOUTHWEST AIRLINES vs. ANTA SPORTS PRODUCT | SOUTHWEST AIRLINES vs. COLUMBIA SPORTSWEAR |
| KINGBOARD CHEMICAL vs. CullenFrost Bankers | KINGBOARD CHEMICAL vs. X FAB Silicon Foundries | KINGBOARD CHEMICAL vs. UNIQA INSURANCE GR | KINGBOARD CHEMICAL vs. SUN LIFE FINANCIAL |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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