Correlation Between Hawaiian Holdings and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Hawaiian Holdings 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 Hawaiian Holdings and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawaiian Holdings and Southwest Airlines, you can compare the effects of market volatilities on Hawaiian Holdings 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 Hawaiian Holdings with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Holdings and Southwest Airlines.
Diversification Opportunities for Hawaiian Holdings and Southwest Airlines
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hawaiian and Southwest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Hawaiian Holdings 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 Hawaiian Holdings 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 Hawaiian Holdings i.e., Hawaiian Holdings and Southwest Airlines go up and down completely randomly.
Pair Corralation between Hawaiian Holdings and Southwest Airlines
Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Hawaiian Holdings is 2.03 times less risky than Southwest Airlines. The stock trades about -0.26 of its potential returns per unit of risk. The Southwest Airlines is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,841 in Southwest Airlines on January 26, 2024 and sell it today you would lose (115.00) from holding Southwest Airlines or give up 4.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawaiian Holdings vs. Southwest Airlines
Performance |
| Timeline |
| Hawaiian Holdings |
| Southwest Airlines |
Hawaiian Holdings and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawaiian Holdings and Southwest Airlines
The main advantage of trading using opposite Hawaiian Holdings and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Holdings 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.| Hawaiian Holdings vs. Southwest Airlines | Hawaiian Holdings vs. JetBlue Airways Corp | Hawaiian Holdings vs. United Airlines Holdings | Hawaiian Holdings vs. Delta Air Lines |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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