Correlation Between Southwest Airlines and KEYCORP

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

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

Diversification Opportunities for Southwest Airlines and KEYCORP

0.34

Correlation Coefficient

Southwest Airlines  KEYCORP

Weak diversification

The 3 months correlation between Southwest and KEYCORP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and KEYCORP MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MTN 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 KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MTN has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and KEYCORP go up and down completely randomly.

Pair Corralation between Southwest Airlines and KEYCORP

Considering the 90-day investment horizon Southwest Airlines is expected to generate 1.13 times less return on investment than KEYCORP. In addition to that, Southwest Airlines is 2.02 times more volatile than KEYCORP MTN. It trades about 0.0 of its total potential returns per unit of risk. KEYCORP MTN is currently generating about 0.0 per unit of volatility. If you would invest  7,576  in KEYCORP MTN on October 22, 2024 and sell it today you would lose (106.00) from holding KEYCORP MTN or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.74%
Values	Daily Returns

Southwest Airlines  vs.  KEYCORP MTN

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.

KEYCORP MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KEYCORP MTN investors.

Pair Trading with Southwest Airlines and KEYCORP

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

The idea behind Southwest Airlines and KEYCORP MTN 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.