Correlation Between International Consolidated and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Southwest Airlines, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Southwest Airlines.
Diversification Opportunities for International Consolidated and Southwest Airlines
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Southwest is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Southwest Airlines go up and down completely randomly.
Pair Corralation between International Consolidated and Southwest Airlines
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.86 times more return on investment than Southwest Airlines. However, International Consolidated Airlines is 1.17 times less risky than Southwest Airlines. It trades about 0.13 of its potential returns per unit of risk. Southwest Airlines is currently generating about -0.17 per unit of risk. If you would invest 387.00 in International Consolidated Airlines on January 27, 2024 and sell it today you would earn a total of 50.00 from holding International Consolidated Airlines or generate 12.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
International Consolidated Air vs. Southwest Airlines
Performance |
| Timeline |
| International Consolidated |
| Southwest Airlines |
International Consolidated and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Southwest Airlines
The main advantage of trading using opposite International Consolidated and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Air France KLM SA | International Consolidated vs. Air France KLM | International Consolidated vs. Finnair Oyj | International Consolidated vs. AirAsia Group Berhad |
| Southwest Airlines vs. Delta Air Lines | Southwest Airlines vs. Frontier Group Holdings | Southwest Airlines vs. Mesa Air Group |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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