Correlation Between Southwest Airlines and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Pentair Plc 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 Pentair Plc 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 Pentair plc, you can compare the effects of market volatilities on Southwest Airlines and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Pentair Plc.
Diversification Opportunities for Southwest Airlines and Pentair Plc
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southwest and Pentair is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Pentair Plc go up and down completely randomly.
Pair Corralation between Southwest Airlines and Pentair Plc
Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.41 times more return on investment than Pentair Plc. However, Southwest Airlines is 1.41 times more volatile than Pentair plc. It trades about 0.16 of its potential returns per unit of risk. Pentair plc is currently generating about 0.15 per unit of risk. If you would invest 2,641 in Southwest Airlines Co on September 25, 2024 and sell it today you would earn a total of 539.00 from holding Southwest Airlines Co or generate 20.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Southwest Airlines Co vs. Pentair plc
Performance |
Timeline |
Southwest Airlines |
Pentair plc |
Southwest Airlines and Pentair Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southwest Airlines and Pentair Plc
The main advantage of trading using opposite Southwest Airlines and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Pentair Plc 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 Pentair Plc will offset losses from the drop in Pentair Plc's long position.Southwest Airlines vs. CDL INVESTMENT | Southwest Airlines vs. TRAVEL LEISURE DL 01 | Southwest Airlines vs. PLAYTIKA HOLDING DL 01 | Southwest Airlines vs. Playa Hotels Resorts |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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