Correlation Between Wabash National and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Wabash National 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 Wabash National and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wabash National and Southwest Airlines Co, you can compare the effects of market volatilities on Wabash National 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 Wabash National with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and Southwest Airlines.
Diversification Opportunities for Wabash National and Southwest Airlines
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wabash and Southwest is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Wabash National 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 Wabash National 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 Wabash National i.e., Wabash National and Southwest Airlines go up and down completely randomly.
Pair Corralation between Wabash National and Southwest Airlines
Assuming the 90 days horizon Wabash National is expected to under-perform the Southwest Airlines. In addition to that, Wabash National is 1.12 times more volatile than Southwest Airlines Co. It trades about -0.06 of its total potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.0 per unit of volatility. If you would invest 3,022 in Southwest Airlines Co on November 27, 2024 and sell it today you would lose (198.00) from holding Southwest Airlines Co or give up 6.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wabash National vs. Southwest Airlines Co
Performance |
| Timeline |
| Wabash National |
| Southwest Airlines |
Wabash National and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wabash National and Southwest Airlines
The main advantage of trading using opposite Wabash National and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wabash National 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.| Wabash National vs. MHP Hotel AG | Wabash National vs. EMPEROR ENT HOTEL | Wabash National vs. Corsair Gaming | Wabash National vs. HYATT HOTELS A |
| Southwest Airlines vs. COMPUTER MODELLING | Southwest Airlines vs. Computershare Limited | Southwest Airlines vs. Playa Hotels Resorts | Southwest Airlines vs. United Internet AG |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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