Correlation Between Southwest Airlines and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and JetBlue Airways 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 JetBlue Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and JetBlue Airways Corp, you can compare the effects of market volatilities on Southwest Airlines and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and JetBlue Airways.
Diversification Opportunities for Southwest Airlines and JetBlue Airways
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Southwest and JetBlue is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways Corp 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and JetBlue Airways go up and down completely randomly.
Pair Corralation between Southwest Airlines and JetBlue Airways
Considering the 90-day investment horizon Southwest Airlines is expected to generate 0.67 times more return on investment than JetBlue Airways. However, Southwest Airlines is 1.5 times less risky than JetBlue Airways. It trades about -0.01 of its potential returns per unit of risk. JetBlue Airways Corp is currently generating about -0.03 per unit of risk. If you would invest 2,801 in Southwest Airlines on January 17, 2024 and sell it today you would lose (17.00) from holding Southwest Airlines or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Southwest Airlines vs. JetBlue Airways Corp
Performance |
| Timeline |
| Southwest Airlines |
| JetBlue Airways Corp |
Southwest Airlines and JetBlue Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and JetBlue Airways
The main advantage of trading using opposite Southwest Airlines and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' long position.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
| JetBlue Airways vs. Frontier Group Holdings | JetBlue Airways vs. Southwest Airlines | JetBlue Airways vs. United Airlines Holdings | JetBlue Airways vs. American Airlines 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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