Correlation Between Southwest Airlines and Genworth Financial

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

By analyzing existing cross correlation between Southwest Airlines and Genworth Financial, you can compare the effects of market volatilities on Southwest Airlines and Genworth Financial 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 Genworth Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Genworth Financial.

Diversification Opportunities for Southwest Airlines and Genworth Financial

0.0

Correlation Coefficient

Southwest Airlines  Genworth Financial

Pay attention - limited upside

The 3 months correlation between Southwest and Genworth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth Financial 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 Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Genworth Financial go up and down completely randomly.

Pair Corralation between Southwest Airlines and Genworth Financial

If you would invest  58,761  in Southwest Airlines on September 5, 2024 and sell it today you would earn a total of  8,828  from holding Southwest Airlines or generate 15.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Southwest Airlines  vs.  Genworth Financial

Southwest Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southwest Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Genworth Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southwest Airlines and Genworth Financial

The main advantage of trading using opposite Southwest Airlines and Genworth Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Genworth Financial 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 Genworth Financial will offset losses from the drop in Genworth Financial's long position.

The idea behind Southwest Airlines and Genworth Financial 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.