Correlation Between Corteva and Southwest Airlines

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

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

Diversification Opportunities for Corteva and Southwest Airlines

0.28

Correlation Coefficient

Corteva  Southwest Airlines

Modest diversification

The 3 months correlation between Corteva and Southwest is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Corteva and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Corteva 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 Corteva 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 Corteva i.e., Corteva and Southwest Airlines go up and down completely randomly.

Pair Corralation between Corteva and Southwest Airlines

If you would invest  16,456  in Southwest Airlines Co on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Southwest Airlines Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Corteva  vs.  Southwest Airlines Co

Corteva

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corteva are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Corteva sustained solid returns over the last few months and may actually be approaching a breakup point.

Southwest Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Corteva and Southwest Airlines

The main advantage of trading using opposite Corteva and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corteva 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 Corteva and Southwest Airlines Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.