Correlation Between Consolidated Communications and Southwest Airlines

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

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

Diversification Opportunities for Consolidated Communications and Southwest Airlines

0.87

Correlation Coefficient

Consolidated Communications  Southwest Airlines

Very poor diversification

The 3 months correlation between Consolidated and Southwest is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Southwest Airlines go up and down completely randomly.

Pair Corralation between Consolidated Communications and Southwest Airlines

If you would invest  448.00  in Consolidated Communications Holdings on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Consolidated Communications Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	25.0%
Values	Daily Returns

Consolidated Communications Ho  vs.  Southwest Airlines Co

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Southwest Airlines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Southwest Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consolidated Communications and Southwest Airlines

The main advantage of trading using opposite Consolidated Communications and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.