Correlation Between Southwest Airlines and Manning Napier

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Manning Napier 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 Manning Napier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southwest Airlines and Manning Napier, you can compare the effects of market volatilities on Southwest Airlines and Manning Napier 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 Manning Napier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Manning Napier.

Diversification Opportunities for Southwest Airlines and Manning Napier

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Correlation Coefficient

Southwest Airlines  Manning Napier

Pay attention - limited upside

The 3 months correlation between Southwest and Manning is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines and Manning Napier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manning Napier 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 Manning Napier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manning Napier has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Manning Napier go up and down completely randomly.

Pair Corralation between Southwest Airlines and Manning Napier

Considering the 90-day investment horizon Southwest Airlines is expected to under-perform the Manning Napier. In addition to that, Southwest Airlines is 2.74 times more volatile than Manning Napier. It trades about -0.04 of its total potential returns per unit of risk. Manning Napier is currently generating about 0.06 per unit of volatility. If you would invest  1,219  in Manning Napier on February 6, 2024 and sell it today you would earn a total of  66.00  from holding Manning Napier or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.43%
Values	Daily Returns

Southwest Airlines  vs.  Manning Napier

Southwest Airlines

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Southwest Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Manning Napier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manning Napier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Manning Napier is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Southwest Airlines and Manning Napier

The main advantage of trading using opposite Southwest Airlines and Manning Napier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Manning Napier 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 Manning Napier will offset losses from the drop in Manning Napier's long position.

The idea behind Southwest Airlines and Manning Napier pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.