Correlation Between Southwest Airlines and Hawaiian Holdings

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

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

Diversification Opportunities for Southwest Airlines and Hawaiian Holdings

0.0

Correlation Coefficient

Southwest Airlines  Hawaiian Holdings

Pay attention - limited upside

The 3 months correlation between Southwest and Hawaiian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings 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 Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Hawaiian Holdings go up and down completely randomly.

Pair Corralation between Southwest Airlines and Hawaiian Holdings

If you would invest  3,336  in Southwest Airlines on December 29, 2024 and sell it today you would earn a total of  23.00  from holding Southwest Airlines or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Southwest Airlines  vs.  Hawaiian Holdings

Southwest Airlines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Southwest Airlines is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hawaiian Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southwest Airlines and Hawaiian Holdings

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

The idea behind Southwest Airlines and Hawaiian Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.