Correlation Between Aegean Airlines and Southwest Airlines

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

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

Diversification Opportunities for Aegean Airlines and Southwest Airlines

-0.83

Correlation Coefficient

Aegean Airlines  Southwest Airlines

Pay attention - limited upside

The 3 months correlation between Aegean and Southwest is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aegean Airlines SA and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Aegean 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 Aegean Airlines SA 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 Aegean Airlines i.e., Aegean Airlines and Southwest Airlines go up and down completely randomly.

Pair Corralation between Aegean Airlines and Southwest Airlines

Assuming the 90 days horizon Aegean Airlines SA is expected to under-perform the Southwest Airlines. In addition to that, Aegean Airlines is 1.07 times more volatile than Southwest Airlines. It trades about -0.22 of its total potential returns per unit of risk. Southwest Airlines is currently generating about -0.1 per unit of volatility. If you would invest  3,372  in Southwest Airlines on October 10, 2024 and sell it today you would lose (84.00) from holding Southwest Airlines or give up 2.49% of portfolio value over 90 days.

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

Aegean Airlines SA  vs.  Southwest Airlines

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Southwest Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aegean Airlines and Southwest Airlines

The main advantage of trading using opposite Aegean Airlines and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegean Airlines 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 Aegean Airlines SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.