Correlation Between Southwest Airlines and Marvell Technology

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Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Marvell Technology 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 Marvell Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines Co and Marvell Technology, you can compare the effects of market volatilities on Southwest Airlines and Marvell Technology 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 Marvell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Marvell Technology.

Diversification Opportunities for Southwest Airlines and Marvell Technology

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Southwest and Marvell is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Marvell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology 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 Co are associated (or correlated) with Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Marvell Technology go up and down completely randomly.

Pair Corralation between Southwest Airlines and Marvell Technology

If you would invest  5,120  in Marvell Technology on September 16, 2024 and sell it today you would earn a total of  2,153  from holding Marvell Technology or generate 42.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Southwest Airlines Co  vs.  Marvell Technology

 Performance 
       Timeline  
Southwest Airlines 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Marvell Technology 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marvell Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Southwest Airlines and Marvell Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwest Airlines and Marvell Technology

The main advantage of trading using opposite Southwest Airlines and Marvell Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Marvell Technology 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 Marvell Technology will offset losses from the drop in Marvell Technology's long position.
The idea behind Southwest Airlines Co and Marvell Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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