Correlation Between SOUTHWEST AIRLINES and SAFETY MEDICAL
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and SAFETY MEDICAL 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 SAFETY MEDICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and SAFETY MEDICAL PROD, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and SAFETY MEDICAL 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 SAFETY MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and SAFETY MEDICAL.
Diversification Opportunities for SOUTHWEST AIRLINES and SAFETY MEDICAL
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SOUTHWEST and SAFETY is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and SAFETY MEDICAL PROD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAFETY MEDICAL PROD 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 SAFETY MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAFETY MEDICAL PROD has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and SAFETY MEDICAL go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and SAFETY MEDICAL
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 0.71 times more return on investment than SAFETY MEDICAL. However, SOUTHWEST AIRLINES is 1.41 times less risky than SAFETY MEDICAL. It trades about 0.11 of its potential returns per unit of risk. SAFETY MEDICAL PROD is currently generating about -0.35 per unit of risk. If you would invest 3,075 in SOUTHWEST AIRLINES on September 12, 2024 and sell it today you would earn a total of 120.00 from holding SOUTHWEST AIRLINES or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. SAFETY MEDICAL PROD
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| SAFETY MEDICAL PROD |
SOUTHWEST AIRLINES and SAFETY MEDICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and SAFETY MEDICAL
The main advantage of trading using opposite SOUTHWEST AIRLINES and SAFETY MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, SAFETY MEDICAL 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 SAFETY MEDICAL will offset losses from the drop in SAFETY MEDICAL's long position.| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc |
| SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc | SAFETY MEDICAL vs. Apple Inc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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