Correlation Between SOUTHWEST AIRLINES and SHELL PLC
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and SHELL PLC 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 SHELL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and SHELL PLC WI, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and SHELL PLC 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 SHELL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and SHELL PLC.
Diversification Opportunities for SOUTHWEST AIRLINES and SHELL PLC
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SOUTHWEST and SHELL is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and SHELL PLC WI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELL PLC WI 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 SHELL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELL PLC WI has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and SHELL PLC go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and SHELL PLC
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.65 times more return on investment than SHELL PLC. However, SOUTHWEST AIRLINES is 1.65 times more volatile than SHELL PLC WI. It trades about 0.08 of its potential returns per unit of risk. SHELL PLC WI is currently generating about -0.01 per unit of risk. If you would invest 2,494 in SOUTHWEST AIRLINES on September 2, 2024 and sell it today you would earn a total of 556.00 from holding SOUTHWEST AIRLINES or generate 22.29% 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. SHELL PLC WI
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| SHELL PLC WI |
SOUTHWEST AIRLINES and SHELL PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and SHELL PLC
The main advantage of trading using opposite SOUTHWEST AIRLINES and SHELL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, SHELL PLC 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 SHELL PLC will offset losses from the drop in SHELL PLC's long position.| SOUTHWEST AIRLINES vs. SIVERS SEMICONDUCTORS AB | SOUTHWEST AIRLINES vs. Darden Restaurants | SOUTHWEST AIRLINES vs. Reliance Steel Aluminum | SOUTHWEST AIRLINES vs. Q2M Managementberatung AG |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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