Correlation Between AXWAY SOFTWARE and SOUTHWEST AIRLINES

Can any of the company-specific risk be diversified away by investing in both AXWAY SOFTWARE 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 AXWAY SOFTWARE and SOUTHWEST AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AXWAY SOFTWARE EO and SOUTHWEST AIRLINES, you can compare the effects of market volatilities on AXWAY SOFTWARE 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 AXWAY SOFTWARE with a short position of SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXWAY SOFTWARE and SOUTHWEST AIRLINES.

Diversification Opportunities for AXWAY SOFTWARE and SOUTHWEST AIRLINES

-0.66

Correlation Coefficient

AXWAY SOFTWARE  SOUTHWEST AIRLINES

Excellent diversification

The 3 months correlation between AXWAY and SOUTHWEST is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding AXWAY SOFTWARE EO and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES and AXWAY SOFTWARE 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 AXWAY SOFTWARE EO 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 AXWAY SOFTWARE i.e., AXWAY SOFTWARE and SOUTHWEST AIRLINES go up and down completely randomly.

Pair Corralation between AXWAY SOFTWARE and SOUTHWEST AIRLINES

Assuming the 90 days horizon AXWAY SOFTWARE EO is expected to generate 0.9 times more return on investment than SOUTHWEST AIRLINES. However, AXWAY SOFTWARE EO is 1.11 times less risky than SOUTHWEST AIRLINES. It trades about 0.1 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about -0.19 per unit of risk. If you would invest  2,730  in AXWAY SOFTWARE EO on December 10, 2024 and sell it today you would earn a total of  190.00  from holding AXWAY SOFTWARE EO or generate 6.96% return on investment over 90 days.

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

AXWAY SOFTWARE EO  vs.  SOUTHWEST AIRLINES

AXWAY SOFTWARE EO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXWAY SOFTWARE EO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AXWAY SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SOUTHWEST AIRLINES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOUTHWEST AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AXWAY SOFTWARE and SOUTHWEST AIRLINES

The main advantage of trading using opposite AXWAY SOFTWARE and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXWAY SOFTWARE 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's long position.

The idea behind AXWAY SOFTWARE EO and SOUTHWEST AIRLINES 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.