Correlation Between Southwest Airlines and Bio Techne

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Bio Techne 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 Bio Techne 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 Bio Techne, you can compare the effects of market volatilities on Southwest Airlines and Bio Techne 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 Bio Techne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Bio Techne.

Diversification Opportunities for Southwest Airlines and Bio Techne

-0.06

Correlation Coefficient

Southwest Airlines  Bio Techne

Good diversification

The 3 months correlation between Southwest and Bio is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Bio Techne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Techne 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 Bio Techne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Techne has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Bio Techne go up and down completely randomly.

Pair Corralation between Southwest Airlines and Bio Techne

Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 0.77 times more return on investment than Bio Techne. However, Southwest Airlines Co is 1.3 times less risky than Bio Techne. It trades about 0.07 of its potential returns per unit of risk. Bio Techne is currently generating about -0.04 per unit of risk. If you would invest  15,435  in Southwest Airlines Co on September 3, 2024 and sell it today you would earn a total of  1,021  from holding Southwest Airlines Co or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Southwest Airlines Co  vs.  Bio Techne

Southwest Airlines

Risk-Adjusted Performance

5 of 100

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 uncertain basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bio Techne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Techne has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Bio Techne is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southwest Airlines and Bio Techne

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

The idea behind Southwest Airlines Co and Bio Techne 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.