Correlation Between SOUTHWEST AIRLINES and Atea ASA

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

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

Diversification Opportunities for SOUTHWEST AIRLINES and Atea ASA

0.53

Correlation Coefficient

SOUTHWEST AIRLINES  Atea ASA

Very weak diversification

The 3 months correlation between SOUTHWEST and Atea is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and Atea ASA go up and down completely randomly.

Pair Corralation between SOUTHWEST AIRLINES and Atea ASA

Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 2.02 times more return on investment than Atea ASA. However, SOUTHWEST AIRLINES is 2.02 times more volatile than Atea ASA. It trades about -0.01 of its potential returns per unit of risk. Atea ASA is currently generating about -0.03 per unit of risk. If you would invest  3,191  in SOUTHWEST AIRLINES on December 22, 2024 and sell it today you would lose (97.00) from holding SOUTHWEST AIRLINES or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

SOUTHWEST AIRLINES  vs.  Atea ASA

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 comparatively stable basic indicators, SOUTHWEST AIRLINES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Atea ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Atea ASA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SOUTHWEST AIRLINES and Atea ASA

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

The idea behind SOUTHWEST AIRLINES and Atea ASA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.