Correlation Between Southwest Airlines and Unity Software

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

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

Diversification Opportunities for Southwest Airlines and Unity Software

0.14

Correlation Coefficient

Southwest Airlines  Unity Software

Average diversification

The 3 months correlation between Southwest and Unity is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software 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 Co are associated (or correlated) with Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Unity Software go up and down completely randomly.

Pair Corralation between Southwest Airlines and Unity Software

If you would invest  16,456  in Southwest Airlines Co on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Southwest Airlines Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Southwest Airlines Co  vs.  Unity Software

Southwest Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Unity Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unity Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southwest Airlines and Unity Software

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

The idea behind Southwest Airlines Co and Unity Software 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.