Correlation Between Zegona Communications and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Zegona Communications 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 Zegona Communications and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zegona Communications Plc and Southwest Airlines Co, you can compare the effects of market volatilities on Zegona Communications 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 Zegona Communications with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Southwest Airlines.
Diversification Opportunities for Zegona Communications and Southwest Airlines
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Zegona and Southwest is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Zegona Communications 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 Zegona Communications Plc 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 Zegona Communications i.e., Zegona Communications and Southwest Airlines go up and down completely randomly.
Pair Corralation between Zegona Communications and Southwest Airlines
Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 3.14 times more return on investment than Southwest Airlines. However, Zegona Communications is 3.14 times more volatile than Southwest Airlines Co. It trades about 0.26 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.05 per unit of risk. If you would invest 31,400 in Zegona Communications Plc on October 20, 2024 and sell it today you would earn a total of 8,400 from holding Zegona Communications Plc or generate 26.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Zegona Communications Plc vs. Southwest Airlines Co
Performance |
| Timeline |
| Zegona Communications Plc |
| Southwest Airlines |
Zegona Communications and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zegona Communications and Southwest Airlines
The main advantage of trading using opposite Zegona Communications and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zegona Communications 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.| Zegona Communications vs. Associated British Foods | Zegona Communications vs. GreenX Metals | Zegona Communications vs. Aptitude Software Group | Zegona Communications vs. Europa Metals |
| Southwest Airlines vs. Live Nation Entertainment | Southwest Airlines vs. Centaur Media | Southwest Airlines vs. Europa Metals | Southwest Airlines vs. Everyman Media Group |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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