Correlation Between Grupo Aeromxico and Southwest Airlines

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

By analyzing existing cross correlation between Grupo Aeromxico SAB and Southwest Airlines, you can compare the effects of market volatilities on Grupo Aeromxico 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 Grupo Aeromxico with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aeromxico and Southwest Airlines.

Diversification Opportunities for Grupo Aeromxico and Southwest Airlines

0.0

Correlation Coefficient

Grupo Aeromxico  Southwest Airlines

Pay attention - limited upside

The 3 months correlation between Grupo and Southwest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aeromxico SAB and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Grupo Aeromxico 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 Grupo Aeromxico SAB 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 Grupo Aeromxico i.e., Grupo Aeromxico and Southwest Airlines go up and down completely randomly.

Pair Corralation between Grupo Aeromxico and Southwest Airlines

If you would invest  68,645  in Southwest Airlines on December 29, 2024 and sell it today you would earn a total of  1,055  from holding Southwest Airlines or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Grupo Aeromxico SAB  vs.  Southwest Airlines

Grupo Aeromxico SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Aeromxico SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Grupo Aeromxico is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Southwest Airlines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Southwest Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Aeromxico and Southwest Airlines

The main advantage of trading using opposite Grupo Aeromxico and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aeromxico 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.

The idea behind Grupo Aeromxico SAB 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.