Correlation Between Virtus Investment and Southwest Airlines

Can any of the company-specific risk be diversified away by investing in both Virtus Investment 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 Virtus Investment and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virtus Investment Partners and Southwest Airlines Co, you can compare the effects of market volatilities on Virtus Investment 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 Virtus Investment with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Investment and Southwest Airlines.

Diversification Opportunities for Virtus Investment and Southwest Airlines

0.83

Correlation Coefficient

Virtus Investment  Southwest Airlines

Very poor diversification

The 3 months correlation between Virtus and Southwest is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Virtus Investment 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 Virtus Investment Partners 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 Virtus Investment i.e., Virtus Investment and Southwest Airlines go up and down completely randomly.

Pair Corralation between Virtus Investment and Southwest Airlines

Assuming the 90 days horizon Virtus Investment Partners is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Virtus Investment Partners is 1.13 times less risky than Southwest Airlines. The stock trades about -0.15 of its potential returns per unit of risk. The Southwest Airlines Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,143  in Southwest Airlines Co on December 22, 2024 and sell it today you would lose (189.00) from holding Southwest Airlines Co or give up 6.01% of portfolio value over 90 days.

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

Virtus Investment Partners  vs.  Southwest Airlines Co

Virtus Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Southwest Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southwest Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Southwest Airlines is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virtus Investment and Southwest Airlines

The main advantage of trading using opposite Virtus Investment and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Investment 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' long position.

The idea behind Virtus Investment Partners and Southwest Airlines 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.