Correlation Between Fiserv and Southwest Airlines

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

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

Diversification Opportunities for Fiserv and Southwest Airlines

-0.61

Correlation Coefficient

Fiserv  Southwest Airlines

Excellent diversification

The 3 months correlation between Fiserv and Southwest is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fiserv Inc and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Fiserv 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 Fiserv Inc 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 Fiserv i.e., Fiserv and Southwest Airlines go up and down completely randomly.

Pair Corralation between Fiserv and Southwest Airlines

Assuming the 90 days trading horizon Fiserv Inc is expected to generate 0.88 times more return on investment than Southwest Airlines. However, Fiserv Inc is 1.14 times less risky than Southwest Airlines. It trades about 0.03 of its potential returns per unit of risk. Southwest Airlines is currently generating about 0.02 per unit of risk. If you would invest  409,500  in Fiserv Inc on December 29, 2024 and sell it today you would earn a total of  11,500  from holding Fiserv Inc or generate 2.81% return on investment over 90 days.

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

Fiserv Inc  vs.  Southwest Airlines

Fiserv Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fiserv Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fiserv 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 Fiserv and Southwest Airlines

The main advantage of trading using opposite Fiserv and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiserv 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 Fiserv Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.