Correlation Between SOUTHWEST AIRLINES and Ganfeng Lithium

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

By analyzing existing cross correlation between SOUTHWEST AIRLINES and Ganfeng Lithium Co, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and Ganfeng Lithium 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 Ganfeng Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and Ganfeng Lithium.

Diversification Opportunities for SOUTHWEST AIRLINES and Ganfeng Lithium

0.22

Correlation Coefficient

SOUTHWEST AIRLINES  Ganfeng Lithium

Modest diversification

The 3 months correlation between SOUTHWEST and Ganfeng is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and Ganfeng Lithium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganfeng Lithium 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 Ganfeng Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganfeng Lithium has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and Ganfeng Lithium go up and down completely randomly.

Pair Corralation between SOUTHWEST AIRLINES and Ganfeng Lithium

Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 1.87 times less return on investment than Ganfeng Lithium. But when comparing it to its historical volatility, SOUTHWEST AIRLINES is 2.38 times less risky than Ganfeng Lithium. It trades about 0.05 of its potential returns per unit of risk. Ganfeng Lithium Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Ganfeng Lithium Co on October 7, 2024 and sell it today you would earn a total of  42.00  from holding Ganfeng Lithium Co or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SOUTHWEST AIRLINES  vs.  Ganfeng Lithium Co

SOUTHWEST AIRLINES

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SOUTHWEST AIRLINES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SOUTHWEST AIRLINES unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ganfeng Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ganfeng Lithium Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SOUTHWEST AIRLINES and Ganfeng Lithium

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

The idea behind SOUTHWEST AIRLINES and Ganfeng Lithium Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.