Correlation Between URU Metals and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both URU Metals 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 URU Metals and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between URU Metals and Southwest Airlines Co, you can compare the effects of market volatilities on URU Metals 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 URU Metals with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of URU Metals and Southwest Airlines.
Diversification Opportunities for URU Metals and Southwest Airlines
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between URU and Southwest is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding URU Metals and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and URU Metals 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 URU Metals 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 URU Metals i.e., URU Metals and Southwest Airlines go up and down completely randomly.
Pair Corralation between URU Metals and Southwest Airlines
Assuming the 90 days trading horizon URU Metals is expected to generate 1.55 times more return on investment than Southwest Airlines. However, URU Metals is 1.55 times more volatile than Southwest Airlines Co. It trades about 0.01 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.07 per unit of risk. If you would invest 16,000 in URU Metals on October 11, 2024 and sell it today you would earn a total of 0.00 from holding URU Metals or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
URU Metals vs. Southwest Airlines Co
Performance |
| Timeline |
| URU Metals |
| Southwest Airlines |
URU Metals and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with URU Metals and Southwest Airlines
The main advantage of trading using opposite URU Metals and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if URU Metals 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.| URU Metals vs. Monster Beverage Corp | URU Metals vs. Ion Beam Applications | URU Metals vs. Gamma Communications PLC | URU Metals vs. GlobalData PLC |
| Southwest Airlines vs. National Beverage Corp | Southwest Airlines vs. Bloomsbury Publishing Plc | Southwest Airlines vs. European Metals Holdings | Southwest Airlines vs. Sovereign Metals |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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