Correlation Between Southwest Airlines and Samsung Electronics

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

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

Diversification Opportunities for Southwest Airlines and Samsung Electronics

-0.45

Correlation Coefficient

Southwest Airlines  Samsung Electronics

Very good diversification

The 3 months correlation between Southwest and Samsung is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Samsung Electronics go up and down completely randomly.

Pair Corralation between Southwest Airlines and Samsung Electronics

Assuming the 90 days trading horizon Southwest Airlines is expected to generate 1.17 times less return on investment than Samsung Electronics. In addition to that, Southwest Airlines is 1.27 times more volatile than Samsung Electronics Co. It trades about 0.05 of its total potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.07 per unit of volatility. If you would invest  1,950,000  in Samsung Electronics Co on December 26, 2024 and sell it today you would earn a total of  143,892  from holding Samsung Electronics Co or generate 7.38% return on investment over 90 days.

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

Southwest Airlines  vs.  Samsung Electronics Co

Southwest Airlines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Samsung Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Samsung Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Southwest Airlines and Samsung Electronics

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

The idea behind Southwest Airlines and Samsung Electronics 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.