Correlation Between Southwest Airlines and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and PIMCO RAFI 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 PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on Southwest Airlines and PIMCO RAFI 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 PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and PIMCO RAFI.
Diversification Opportunities for Southwest Airlines and PIMCO RAFI
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southwest and PIMCO is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic 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 PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and PIMCO RAFI go up and down completely randomly.
Pair Corralation between Southwest Airlines and PIMCO RAFI
Considering the 90-day investment horizon Southwest Airlines is expected to under-perform the PIMCO RAFI. In addition to that, Southwest Airlines is 4.13 times more volatile than PIMCO RAFI Dynamic. It trades about -0.16 of its total potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.0 per unit of volatility. If you would invest 1,909 in PIMCO RAFI Dynamic on January 17, 2024 and sell it today you would earn a total of 0.00 from holding PIMCO RAFI Dynamic or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| Southwest Airlines |
| PIMCO RAFI Dynamic |
Southwest Airlines and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and PIMCO RAFI
The main advantage of trading using opposite Southwest Airlines and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, PIMCO RAFI 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 PIMCO RAFI will offset losses from the drop in PIMCO RAFI's long position.| Southwest Airlines vs. United Airlines Holdings | Southwest Airlines vs. American Airlines Group | Southwest Airlines vs. JetBlue Airways Corp | Southwest Airlines vs. Spirit Airlines |
| PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental International | PIMCO RAFI vs. Schwab Fundamental Small | PIMCO RAFI vs. Schwab Fundamental Large |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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