Correlation Between Southwest Airlines and Endeavour Mining

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Endeavour Mining 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 Endeavour Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southwest Airlines Co and Endeavour Mining Corp, you can compare the effects of market volatilities on Southwest Airlines and Endeavour Mining 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 Endeavour Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Endeavour Mining.

Diversification Opportunities for Southwest Airlines and Endeavour Mining

-0.43

Correlation Coefficient

Southwest Airlines  Endeavour Mining

Very good diversification

The 3 months correlation between Southwest and Endeavour is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Endeavour Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endeavour Mining Corp 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 Co are associated (or correlated) with Endeavour Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endeavour Mining Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Endeavour Mining go up and down completely randomly.

Pair Corralation between Southwest Airlines and Endeavour Mining

Assuming the 90 days trading horizon Southwest Airlines is expected to generate 6.35 times less return on investment than Endeavour Mining. In addition to that, Southwest Airlines is 1.01 times more volatile than Endeavour Mining Corp. It trades about 0.03 of its total potential returns per unit of risk. Endeavour Mining Corp is currently generating about 0.18 per unit of volatility. If you would invest  141,600  in Endeavour Mining Corp on December 26, 2024 and sell it today you would earn a total of  35,600  from holding Endeavour Mining Corp or generate 25.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Southwest Airlines Co  vs.  Endeavour Mining Corp

Southwest Airlines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Southwest Airlines is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Endeavour Mining Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Endeavour Mining Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Endeavour Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southwest Airlines and Endeavour Mining

The main advantage of trading using opposite Southwest Airlines and Endeavour Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Endeavour Mining 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 Endeavour Mining will offset losses from the drop in Endeavour Mining's long position.

The idea behind Southwest Airlines Co and Endeavour Mining Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.