Correlation Between Southwest Airlines and Canlan Ice

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

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

Diversification Opportunities for Southwest Airlines and Canlan Ice

0.41

Correlation Coefficient

Southwest Airlines  Canlan Ice

Very weak diversification

The 3 months correlation between Southwest and Canlan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Canlan Ice go up and down completely randomly.

Pair Corralation between Southwest Airlines and Canlan Ice

If you would invest  3,236  in Southwest Airlines on September 28, 2024 and sell it today you would earn a total of  183.00  from holding Southwest Airlines or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Southwest Airlines  vs.  Canlan Ice Sports

Southwest Airlines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Southwest Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

Canlan Ice Sports

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Canlan Ice Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southwest Airlines and Canlan Ice

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

The idea behind Southwest Airlines and Canlan Ice Sports 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.