Correlation Between Southwest Airlines and PIMCO 1
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and PIMCO 1 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 1 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 1 5 Year, you can compare the effects of market volatilities on Southwest Airlines and PIMCO 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and PIMCO 1.
Diversification Opportunities for Southwest Airlines and PIMCO 1
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southwest and PIMCO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and PIMCO 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 1 5 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 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 1 5 has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and PIMCO 1 go up and down completely randomly.
Pair Corralation between Southwest Airlines and PIMCO 1
Considering the 90-day investment horizon Southwest Airlines is expected to generate 12.7 times more return on investment than PIMCO 1. However, Southwest Airlines is 12.7 times more volatile than PIMCO 1 5 Year. It trades about 0.09 of its potential returns per unit of risk. PIMCO 1 5 Year is currently generating about -0.03 per unit of risk. If you would invest 2,841 in Southwest Airlines on January 26, 2024 and sell it today you would earn a total of 89.00 from holding Southwest Airlines or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Southwest Airlines vs. PIMCO 1 5 Year
Performance |
| Timeline |
| Southwest Airlines |
| PIMCO 1 5 |
Southwest Airlines and PIMCO 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and PIMCO 1
The main advantage of trading using opposite Southwest Airlines and PIMCO 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, PIMCO 1 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 1 will offset losses from the drop in PIMCO 1'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 1 vs. iShares iBoxx Investment | PIMCO 1 vs. iShares 1 3 Year | PIMCO 1 vs. iShares 7 10 Year | PIMCO 1 vs. iShares Core Aggregate |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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