Correlation Between Southwest Airlines and Barclays PLC

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

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

Diversification Opportunities for Southwest Airlines and Barclays PLC

0.85

Correlation Coefficient

Southwest Airlines  Barclays PLC

Very poor diversification

The 3 months correlation between Southwest and Barclays is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Barclays PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Barclays PLC go up and down completely randomly.

Pair Corralation between Southwest Airlines and Barclays PLC

If you would invest  27,000  in Barclays PLC on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Barclays PLC or generate 0.0% return on investment over 90 days.

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

Southwest Airlines  vs.  Barclays PLC

Southwest Airlines

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 9 (%) 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.

Barclays PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barclays PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southwest Airlines and Barclays PLC

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

The idea behind Southwest Airlines and Barclays PLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.