Correlation Between Identiv and Southwest Airlines

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

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

Diversification Opportunities for Identiv and Southwest Airlines

0.55

Correlation Coefficient

Identiv  Southwest Airlines

Very weak diversification

The 3 months correlation between Identiv and Southwest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Identiv and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Identiv 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 Identiv 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 Identiv i.e., Identiv and Southwest Airlines go up and down completely randomly.

Pair Corralation between Identiv and Southwest Airlines

Assuming the 90 days trading horizon Identiv is expected to generate 2.2 times more return on investment than Southwest Airlines. However, Identiv is 2.2 times more volatile than Southwest Airlines Co. It trades about -0.02 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.05 per unit of risk. If you would invest  360.00  in Identiv on November 29, 2024 and sell it today you would lose (27.00) from holding Identiv or give up 7.5% of portfolio value over 90 days.

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

Identiv  vs.  Southwest Airlines Co

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Identiv is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Southwest Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southwest Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Southwest Airlines is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Identiv and Southwest Airlines

The main advantage of trading using opposite Identiv and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Identiv 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 Identiv 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.