Correlation Between Southwest Airlines and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and LATAM 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 Southwest Airlines and LATAM Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and LATAM Airlines Group, you can compare the effects of market volatilities on Southwest Airlines and LATAM 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 Southwest Airlines with a short position of LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and LATAM Airlines.
Diversification Opportunities for Southwest Airlines and LATAM Airlines
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and LATAM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines Group 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 LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and LATAM Airlines go up and down completely randomly.
Pair Corralation between Southwest Airlines and LATAM Airlines
If you would invest 2,851 in Southwest Airlines on January 25, 2024 and sell it today you would earn a total of 79.00 from holding Southwest Airlines or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Southwest Airlines vs. LATAM Airlines Group
Performance |
| Timeline |
| Southwest Airlines |
| LATAM Airlines Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southwest Airlines and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and LATAM Airlines
The main advantage of trading using opposite Southwest Airlines and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, LATAM 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 LATAM Airlines will offset losses from the drop in LATAM Airlines' 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 |
| LATAM Airlines vs. Juniata Valley Financial | LATAM Airlines vs. Western Asset Investment | LATAM Airlines vs. Crombie Real Estate | LATAM Airlines vs. Presidio Property Trust |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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