Correlation Between Southwest Airlines and Longfor Group

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Longfor Group 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 Longfor Group 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 Longfor Group Holdings, you can compare the effects of market volatilities on Southwest Airlines and Longfor Group 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 Longfor Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Longfor Group.

Diversification Opportunities for Southwest Airlines and Longfor Group

-0.45

Correlation Coefficient

Southwest Airlines  Longfor Group

Very good diversification

The 3 months correlation between Southwest and Longfor is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group 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 Co are associated (or correlated) with Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Longfor Group go up and down completely randomly.

Pair Corralation between Southwest Airlines and Longfor Group

Assuming the 90 days horizon Southwest Airlines Co is expected to generate 1.07 times more return on investment than Longfor Group. However, Southwest Airlines is 1.07 times more volatile than Longfor Group Holdings. It trades about 0.3 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about -0.06 per unit of risk. If you would invest  2,072  in Southwest Airlines Co on April 22, 2025 and sell it today you would earn a total of  1,061  from holding Southwest Airlines Co or generate 51.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Southwest Airlines Co  vs.  Longfor Group Holdings

Southwest Airlines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Southwest Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Longfor Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Southwest Airlines and Longfor Group

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

The idea behind Southwest Airlines Co and Longfor Group Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.