Correlation Between Southwest Airlines and Contagious Gaming

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

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

Diversification Opportunities for Southwest Airlines and Contagious Gaming

0.0

Correlation Coefficient

Southwest Airlines  Contagious Gaming

Pay attention - limited upside

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

Pair Corralation between Southwest Airlines and Contagious Gaming

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	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Southwest Airlines  vs.  Contagious Gaming

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.

Contagious Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contagious Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Contagious Gaming is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southwest Airlines and Contagious Gaming

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

The idea behind Southwest Airlines and Contagious Gaming 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .