Correlation Between Southwest Airlines and ING Groep

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

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

Diversification Opportunities for Southwest Airlines and ING Groep

0.0

Correlation Coefficient

Southwest Airlines  ING Groep

Pay attention - limited upside

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

Pair Corralation between Southwest Airlines and ING Groep

If you would invest  54,414  in Southwest Airlines on September 14, 2024 and sell it today you would earn a total of  13,586  from holding Southwest Airlines or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Southwest Airlines  vs.  ING Groep NV

Southwest Airlines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 16 (%) 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.

ING Groep NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Groep NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ING Groep 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 ING Groep

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

The idea behind Southwest Airlines and ING Groep NV 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.