Correlation Between SOUTHWEST AIRLINES and CLOVER HEALTH

Can any of the company-specific risk be diversified away by investing in both SOUTHWEST AIRLINES and CLOVER HEALTH 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 CLOVER HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOUTHWEST AIRLINES and CLOVER HEALTH INV, you can compare the effects of market volatilities on SOUTHWEST AIRLINES and CLOVER HEALTH 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 CLOVER HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHWEST AIRLINES and CLOVER HEALTH.

Diversification Opportunities for SOUTHWEST AIRLINES and CLOVER HEALTH

-0.43

Correlation Coefficient

SOUTHWEST AIRLINES  CLOVER HEALTH

Very good diversification

The 3 months correlation between SOUTHWEST and CLOVER is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHWEST AIRLINES and CLOVER HEALTH INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLOVER HEALTH INV 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 CLOVER HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLOVER HEALTH INV has no effect on the direction of SOUTHWEST AIRLINES i.e., SOUTHWEST AIRLINES and CLOVER HEALTH go up and down completely randomly.

Pair Corralation between SOUTHWEST AIRLINES and CLOVER HEALTH

Assuming the 90 days trading horizon SOUTHWEST AIRLINES is expected to generate 0.64 times more return on investment than CLOVER HEALTH. However, SOUTHWEST AIRLINES is 1.57 times less risky than CLOVER HEALTH. It trades about 0.28 of its potential returns per unit of risk. CLOVER HEALTH INV is currently generating about -0.02 per unit of risk. If you would invest  2,127  in SOUTHWEST AIRLINES on April 21, 2025 and sell it today you would earn a total of  1,020  from holding SOUTHWEST AIRLINES or generate 47.95% 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  vs.  CLOVER HEALTH INV

SOUTHWEST AIRLINES

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOUTHWEST AIRLINES are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SOUTHWEST AIRLINES unveiled solid returns over the last few months and may actually be approaching a breakup point.

CLOVER HEALTH INV

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLOVER HEALTH INV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CLOVER HEALTH is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SOUTHWEST AIRLINES and CLOVER HEALTH

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

The idea behind SOUTHWEST AIRLINES and CLOVER HEALTH INV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.