Correlation Between SOUTHWEST AIRLINES and AB Volvo
Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and AB Volvo 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 AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOUTHWEST AIRLINES and AB Volvo, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and AB Volvo 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 AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and AB Volvo.
Diversification Opportunities for SOUTHWEST AIRLINES and AB Volvo
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SOUTHWEST and VOL1 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and AB Volvo go up and down completely randomly.
Pair Corralation between SOUTHWEST AIRLINES and AB Volvo
Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.22 times more return on investment than AB Volvo. However, SOUTHWEST AIRLINES is 1.22 times more volatile than AB Volvo. It trades about 0.16 of its potential returns per unit of risk. AB Volvo is currently generating about 0.11 per unit of risk. If you would invest 2,617 in SOUTHWEST AIRLINES on September 12, 2024 and sell it today you would earn a total of 561.00 from holding SOUTHWEST AIRLINES or generate 21.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOUTHWEST AIRLINES vs. AB Volvo
Performance |
| Timeline |
| SOUTHWEST AIRLINES |
| AB Volvo |
SOUTHWEST AIRLINES and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOUTHWEST AIRLINES and AB Volvo
The main advantage of trading using opposite SOUTHWEST AIRLINES and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOUTHWEST AIRLINES position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc |
| AB Volvo vs. Daimler Truck Holding | AB Volvo vs. Superior Plus Corp | AB Volvo vs. SIVERS SEMICONDUCTORS AB | AB Volvo vs. NorAm Drilling AS |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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