Correlation Between Southwest Airlines and Compaa Minera

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

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

Diversification Opportunities for Southwest Airlines and Compaa Minera

-0.57

Correlation Coefficient

Southwest Airlines  Compaa Minera

Excellent diversification

The 3 months correlation between Southwest and Compaa is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Compaa Minera Autln in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compaa Minera Autln and Southwest Airlines 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 Southwest Airlines are associated (or correlated) with Compaa Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compaa Minera Autln has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Compaa Minera go up and down completely randomly.

Pair Corralation between Southwest Airlines and Compaa Minera

Assuming the 90 days trading horizon Southwest Airlines is expected to generate 1.15 times more return on investment than Compaa Minera. However, Southwest Airlines is 1.15 times more volatile than Compaa Minera Autln. It trades about -0.04 of its potential returns per unit of risk. Compaa Minera Autln is currently generating about -0.56 per unit of risk. If you would invest  67,629  in Southwest Airlines on October 12, 2024 and sell it today you would lose (1,029) from holding Southwest Airlines or give up 1.52% of portfolio value over 90 days.

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

Southwest Airlines  vs.  Compaa Minera Autln

Southwest Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 10 (%) 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.

Compaa Minera Autln

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compaa Minera Autln has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Southwest Airlines and Compaa Minera

The main advantage of trading using opposite Southwest Airlines and Compaa Minera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Compaa Minera 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 Compaa Minera will offset losses from the drop in Compaa Minera's long position.

The idea behind Southwest Airlines and Compaa Minera Autln 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.