Correlation Between VIVA WINE and Southwest Airlines

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

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

Diversification Opportunities for VIVA WINE and Southwest Airlines

-0.83

Correlation Coefficient

VIVA WINE  Southwest Airlines

Pay attention - limited upside

The 3 months correlation between VIVA and Southwest is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding VIVA WINE GROUP and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and VIVA WINE 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 VIVA WINE GROUP 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 VIVA WINE i.e., VIVA WINE and Southwest Airlines go up and down completely randomly.

Pair Corralation between VIVA WINE and Southwest Airlines

Assuming the 90 days horizon VIVA WINE GROUP is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, VIVA WINE GROUP is 1.15 times less risky than Southwest Airlines. The stock trades about -0.11 of its potential returns per unit of risk. The Southwest Airlines Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,583  in Southwest Airlines Co on September 2, 2024 and sell it today you would earn a total of  464.00  from holding Southwest Airlines Co or generate 17.96% return on investment over 90 days.

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

VIVA WINE GROUP  vs.  Southwest Airlines Co

VIVA WINE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIVA WINE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Southwest Airlines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 11 (%) 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 VIVA WINE and Southwest Airlines

The main advantage of trading using opposite VIVA WINE and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIVA WINE 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 VIVA WINE GROUP 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.