Correlation Between Southwest Airlines and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline Corp, you can compare the effects of market volatilities on Southwest Airlines and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Pembina Pipeline.
Diversification Opportunities for Southwest Airlines and Pembina Pipeline
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Pembina is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Southwest Airlines and Pembina Pipeline
Assuming the 90 days horizon Southwest Airlines Co is expected to under-perform the Pembina Pipeline. In addition to that, Southwest Airlines is 2.33 times more volatile than Pembina Pipeline Corp. It trades about -0.07 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.23 per unit of volatility. If you would invest 3,225 in Pembina Pipeline Corp on March 3, 2024 and sell it today you would earn a total of 130.00 from holding Pembina Pipeline Corp or generate 4.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Southwest Airlines Co vs. Pembina Pipeline Corp
Performance |
Timeline |
Southwest Airlines |
Pembina Pipeline Corp |
Southwest Airlines and Pembina Pipeline Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southwest Airlines and Pembina Pipeline
The main advantage of trading using opposite Southwest Airlines and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.Southwest Airlines vs. Schweizer Electronic AG | Southwest Airlines vs. Ultra Clean Holdings | Southwest Airlines vs. United Rentals | Southwest Airlines vs. ARROW ELECTRONICS |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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