Correlation Between Southwest Airlines and 105340AR4

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and 105340AR4 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 105340AR4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southwest Airlines and BDN 755 15 MAR 28, you can compare the effects of market volatilities on Southwest Airlines and 105340AR4 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 105340AR4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and 105340AR4.

Diversification Opportunities for Southwest Airlines and 105340AR4

-0.15

Correlation Coefficient

Southwest Airlines  105340AR4

Good diversification

The 3 months correlation between Southwest and 105340AR4 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and BDN 755 15 MAR 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDN 755 15 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 105340AR4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDN 755 15 has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and 105340AR4 go up and down completely randomly.

Pair Corralation between Southwest Airlines and 105340AR4

Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.52 times more return on investment than 105340AR4. However, Southwest Airlines is 1.92 times less risky than 105340AR4. It trades about -0.22 of its potential returns per unit of risk. BDN 755 15 MAR 28 is currently generating about -0.13 per unit of risk. If you would invest  3,368  in Southwest Airlines on October 22, 2024 and sell it today you would lose (158.00) from holding Southwest Airlines or give up 4.69% of portfolio value over 90 days.

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

Southwest Airlines  vs.  BDN 755 15 MAR 28

Southwest Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BDN 755 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BDN 755 15 MAR 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 105340AR4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southwest Airlines and 105340AR4

The main advantage of trading using opposite Southwest Airlines and 105340AR4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, 105340AR4 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 105340AR4 will offset losses from the drop in 105340AR4's long position.

The idea behind Southwest Airlines and BDN 755 15 MAR 28 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.