Correlation Between Southwest Airlines and Avianca Holdings
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Avianca Holdings 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 Avianca Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Airlines and Avianca Holdings SA, you can compare the effects of market volatilities on Southwest Airlines and Avianca Holdings 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 Avianca Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Avianca Holdings.
Diversification Opportunities for Southwest Airlines and Avianca Holdings
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southwest and Avianca is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Avianca Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avianca Holdings 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 Avianca Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avianca Holdings has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Avianca Holdings go up and down completely randomly.
Pair Corralation between Southwest Airlines and Avianca Holdings
If you would invest (100.00) in Avianca Holdings SA on February 7, 2024 and sell it today you would earn a total of 100.00 from holding Avianca Holdings SA or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Southwest Airlines vs. Avianca Holdings SA
Performance |
| Timeline |
| Southwest Airlines |
| Avianca Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southwest Airlines and Avianca Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Avianca Holdings
The main advantage of trading using opposite Southwest Airlines and Avianca Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Avianca Holdings 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 Avianca Holdings will offset losses from the drop in Avianca Holdings' 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 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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