Correlation Between Southwest Airlines and Ainsworth Game

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

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

Diversification Opportunities for Southwest Airlines and Ainsworth Game

-0.65

Correlation Coefficient

Southwest Airlines  Ainsworth Game

Excellent diversification

The 3 months correlation between Southwest and Ainsworth is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Ainsworth Game Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ainsworth Game Technology 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 Ainsworth Game. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ainsworth Game Technology has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Ainsworth Game go up and down completely randomly.

Pair Corralation between Southwest Airlines and Ainsworth Game

Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.58 times more return on investment than Ainsworth Game. However, Southwest Airlines is 1.72 times less risky than Ainsworth Game. It trades about 0.11 of its potential returns per unit of risk. Ainsworth Game Technology is currently generating about 0.02 per unit of risk. If you would invest  2,890  in Southwest Airlines on September 18, 2024 and sell it today you would earn a total of  390.00  from holding Southwest Airlines or generate 13.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Southwest Airlines  vs.  Ainsworth Game Technology

Southwest Airlines

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Southwest Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Ainsworth Game Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ainsworth Game Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ainsworth Game is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southwest Airlines and Ainsworth Game

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

The idea behind Southwest Airlines and Ainsworth Game Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.