Correlation Between United Natural and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both United Natural and Southwest Airlines 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 United Natural and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Natural Foods and Southwest Airlines Co, you can compare the effects of market volatilities on United Natural and Southwest Airlines 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 United Natural with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Southwest Airlines.
Diversification Opportunities for United Natural and Southwest Airlines
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Southwest is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and United Natural 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 United Natural Foods are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of United Natural i.e., United Natural and Southwest Airlines go up and down completely randomly.
Pair Corralation between United Natural and Southwest Airlines
Assuming the 90 days horizon United Natural Foods is expected to generate 1.21 times more return on investment than Southwest Airlines. However, United Natural is 1.21 times more volatile than Southwest Airlines Co. It trades about 0.37 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.29 per unit of risk. If you would invest 1,820 in United Natural Foods on August 28, 2024 and sell it today you would earn a total of 390.00 from holding United Natural Foods or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Natural Foods vs. Southwest Airlines Co
Performance |
| Timeline |
| United Natural Foods |
| Southwest Airlines |
United Natural and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Southwest Airlines
The main advantage of trading using opposite United Natural and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| United Natural vs. Lion One Metals | United Natural vs. LION ONE METALS | United Natural vs. GREENX METALS LTD | United Natural vs. Harmony Gold Mining |
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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