Correlation Between Grupo Carso and Southwest Airlines

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

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

Diversification Opportunities for Grupo Carso and Southwest Airlines

-0.46

Correlation Coefficient

Grupo Carso  Southwest Airlines

Very good diversification

The 3 months correlation between Grupo and Southwest is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Grupo Carso 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 Grupo Carso SAB 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 Grupo Carso i.e., Grupo Carso and Southwest Airlines go up and down completely randomly.

Pair Corralation between Grupo Carso and Southwest Airlines

Assuming the 90 days trading horizon Grupo Carso SAB is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Carso SAB is 1.02 times less risky than Southwest Airlines. The stock trades about -0.04 of its potential returns per unit of risk. The Southwest Airlines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  49,719  in Southwest Airlines on October 3, 2024 and sell it today you would earn a total of  19,331  from holding Southwest Airlines or generate 38.88% return on investment over 90 days.

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

Grupo Carso SAB  vs.  Southwest Airlines

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Carso 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

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southwest Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and Southwest Airlines

The main advantage of trading using opposite Grupo Carso and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Carso 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 Grupo Carso SAB 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.