Correlation Between Ping An and SOUTHWEST AIRLINES

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

By analyzing existing cross correlation between Ping An Insurance and SOUTHWEST AIRLINES, you can compare the effects of market volatilities on Ping An and SOUTHWEST AIRLINES 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 Ping An with a short position of SOUTHWEST AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and SOUTHWEST AIRLINES.

Diversification Opportunities for Ping An and SOUTHWEST AIRLINES

-0.19

Correlation Coefficient

Ping An  SOUTHWEST AIRLINES

Good diversification

The 3 months correlation between Ping and SOUTHWEST is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and SOUTHWEST AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHWEST AIRLINES and Ping An 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 Ping An Insurance are associated (or correlated) with SOUTHWEST AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHWEST AIRLINES has no effect on the direction of Ping An i.e., Ping An and SOUTHWEST AIRLINES go up and down completely randomly.

Pair Corralation between Ping An and SOUTHWEST AIRLINES

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 1.92 times more return on investment than SOUTHWEST AIRLINES. However, Ping An is 1.92 times more volatile than SOUTHWEST AIRLINES. It trades about 0.09 of its potential returns per unit of risk. SOUTHWEST AIRLINES is currently generating about 0.03 per unit of risk. If you would invest  407.00  in Ping An Insurance on December 5, 2024 and sell it today you would earn a total of  144.00  from holding Ping An Insurance or generate 35.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Ping An Insurance  vs.  SOUTHWEST AIRLINES

Ping An Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ping An is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SOUTHWEST AIRLINES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOUTHWEST AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ping An and SOUTHWEST AIRLINES

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

The idea behind Ping An Insurance and SOUTHWEST AIRLINES 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..