Correlation Between BioNTech and SOUTHWEST AIRLINES

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

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

Diversification Opportunities for BioNTech and SOUTHWEST AIRLINES

0.67

Correlation Coefficient

BioNTech  SOUTHWEST AIRLINES

Poor diversification

The 3 months correlation between BioNTech and SOUTHWEST is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BioNTech SE and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES and BioNTech 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 BioNTech SE 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 BioNTech i.e., BioNTech and SOUTHWEST AIRLINES go up and down completely randomly.

Pair Corralation between BioNTech and SOUTHWEST AIRLINES

Assuming the 90 days trading horizon BioNTech is expected to generate 1.37 times less return on investment than SOUTHWEST AIRLINES. In addition to that, BioNTech is 1.74 times more volatile than SOUTHWEST AIRLINES. It trades about 0.06 of its total potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about 0.13 per unit of volatility. If you would invest  2,691  in SOUTHWEST AIRLINES on October 25, 2024 and sell it today you would earn a total of  376.00  from holding SOUTHWEST AIRLINES or generate 13.97% return on investment over 90 days.

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

BioNTech SE  vs.  SOUTHWEST AIRLINES

BioNTech SE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioNTech SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, BioNTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SOUTHWEST AIRLINES

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SOUTHWEST AIRLINES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SOUTHWEST AIRLINES unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BioNTech and SOUTHWEST AIRLINES

The main advantage of trading using opposite BioNTech and SOUTHWEST AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BioNTech 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 BioNTech SE 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.