Correlation Between LATAM Airlines and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both LATAM Airlines and Southwest Airlines 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 LATAM Airlines and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LATAM Airlines Group and Southwest Airlines, you can compare the effects of market volatilities on LATAM Airlines and Southwest Airlines 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 LATAM Airlines with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of LATAM Airlines and Southwest Airlines.
Diversification Opportunities for LATAM Airlines and Southwest Airlines
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between LATAM and Southwest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and LATAM 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 LATAM Airlines Group are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of LATAM Airlines i.e., LATAM Airlines and Southwest Airlines go up and down completely randomly.
Pair Corralation between LATAM Airlines and Southwest Airlines
If you would invest 2,851 in Southwest Airlines on January 25, 2024 and sell it today you would earn a total of 79.00 from holding Southwest Airlines or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
LATAM Airlines Group vs. Southwest Airlines
Performance |
| Timeline |
| LATAM Airlines Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Southwest Airlines |
LATAM Airlines and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LATAM Airlines and Southwest Airlines
The main advantage of trading using opposite LATAM Airlines and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| LATAM Airlines vs. Juniata Valley Financial | LATAM Airlines vs. Western Asset Investment | LATAM Airlines vs. Crombie Real Estate | LATAM Airlines vs. Presidio Property Trust |
| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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