Correlation Between SOUTHWEST AIRLINES and HEMISPHERE EGY
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and HEMISPHERE EGY 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 HEMISPHERE EGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and HEMISPHERE EGY, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and HEMISPHERE EGY 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 HEMISPHERE EGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and HEMISPHERE EGY.
Diversification Opportunities for SOUTHWEST AIRLINES and HEMISPHERE EGY
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SOUTHWEST and HEMISPHERE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY 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 HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and HEMISPHERE EGY go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and HEMISPHERE EGY
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 5.47 times less return on investment than HEMISPHERE EGY. In addition to that, SOUTHWEST AIRLINES is 1.51 times more volatile than HEMISPHERE EGY. It trades about 0.01 of its total potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.1 per unit of volatility. If you would invest 67.00 in HEMISPHERE EGY on October 14, 2024 and sell it today you would earn a total of 57.00 from holding HEMISPHERE EGY or generate 85.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. HEMISPHERE EGY
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| HEMISPHERE EGY |
SOUTHWEST AIRLINES and HEMISPHERE EGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and HEMISPHERE EGY
The main advantage of trading using opposite SOUTHWEST AIRLINES and HEMISPHERE EGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, HEMISPHERE EGY 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 HEMISPHERE EGY will offset losses from the drop in HEMISPHERE EGY's long position.| SOUTHWEST AIRLINES vs. RETAIL FOOD GROUP | SOUTHWEST AIRLINES vs. SPARTAN STORES | SOUTHWEST AIRLINES vs. National Retail Properties | SOUTHWEST AIRLINES vs. DeVry Education Group |
| HEMISPHERE EGY vs. Soken Chemical Engineering | HEMISPHERE EGY vs. Tencent Music Entertainment | HEMISPHERE EGY vs. China BlueChemical | HEMISPHERE EGY vs. Mitsubishi Gas 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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