Correlation Between Southwest Airlines and IShares Physical

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and IShares Physical 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 IShares Physical 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 iShares Physical Silver, you can compare the effects of market volatilities on Southwest Airlines and IShares Physical 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 IShares Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and IShares Physical.

Diversification Opportunities for Southwest Airlines and IShares Physical

-0.07

Correlation Coefficient

Southwest Airlines  IShares Physical

Good diversification

The 3 months correlation between Southwest and IShares is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and iShares Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Physical Silver 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 IShares Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Physical Silver has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and IShares Physical go up and down completely randomly.

Pair Corralation between Southwest Airlines and IShares Physical

Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 1.19 times more return on investment than IShares Physical. However, Southwest Airlines is 1.19 times more volatile than iShares Physical Silver. It trades about 0.11 of its potential returns per unit of risk. iShares Physical Silver is currently generating about 0.07 per unit of risk. If you would invest  2,913  in Southwest Airlines Co on September 12, 2024 and sell it today you would earn a total of  434.00  from holding Southwest Airlines Co or generate 14.9% return on investment over 90 days.

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

Southwest Airlines Co  vs.  iShares Physical Silver

Southwest Airlines

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Southwest Airlines unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Physical Silver

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Southwest Airlines and IShares Physical

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

The idea behind Southwest Airlines Co and iShares Physical Silver 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.