Correlation Between Vita Coco and Southwest Airlines

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

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

Diversification Opportunities for Vita Coco and Southwest Airlines

-0.26

Correlation Coefficient

Vita Coco  Southwest Airlines

Very good diversification

The 3 months correlation between Vita and Southwest is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Southwest Airlines go up and down completely randomly.

Pair Corralation between Vita Coco and Southwest Airlines

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Southwest Airlines. In addition to that, Vita Coco is 1.55 times more volatile than Southwest Airlines. It trades about -0.09 of its total potential returns per unit of risk. Southwest Airlines is currently generating about 0.02 per unit of volatility. If you would invest  3,336  in Southwest Airlines on December 28, 2024 and sell it today you would earn a total of  23.00  from holding Southwest Airlines or generate 0.69% return on investment over 90 days.

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

Vita Coco  vs.  Southwest Airlines

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 stable basic indicators, Southwest Airlines is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vita Coco and Southwest Airlines

The main advantage of trading using opposite Vita Coco and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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 Vita Coco 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 CEOs Directory module to screen CEOs from public companies around the world.