49.6 +0.21 (+0.43%) Sell

Want to invest in LUV? Consider as it managed to marginally outperform the broader market

13 min read

SOUTHWEST AIRLINES CO managed to marginally outperform the broader market on Tuesday. It gained +0.43% to close at 49.6. It is currently trading -25% below it's 52 week high of 66.29.

[Themes containing LUV]

LUV showed a strong down trend over the last 3 months. During this period LUV returned -21.41% and saw a maximum drawdown of -24.87%. There were 2 short signals during this period that returned a cumulative of +12.47% to investors.


LUV has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, LUV underperformed the SP500 index on 48% days. Which indicates that on days LUV underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

LUV returned losses on 61% days in the last three months. During this time, it delivered on average -0.36% per day. It delivered it's worst daily return of -8.57%, during this period, on Thursday, 25 Oct, 2018. There was initially a bullish trend during this period which started on 21 Nov, 2018 and went on till 30 Nov, 2018. The bullish trend returned +5.77% to investors. This was followed by a bearish trend that started on 7 Dec, 2018 and ended on 17 Dec, 2018. This bearish trend lost -8.08% of investor capital.

On monthly basis, LUV delivered losses in more months over the last year, than profits. LUV delivered profits less regularly than SP500 index. LUV was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -20.42% compared to -7.75% returned by SP500 index in Dec 2018. LUV had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jan 2018 to Jun 2018) during which period it delivered -20.6%.

Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it .
-- Peter Lynch

LUV is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in LUV's volatility from 19 Sep, 2018 to 30 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that LUV has significant positive skewness in it's return distribution. This indicates that investors can expect LUV to recover from drawdowns quickly. Which makes LUV a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in LUV derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than LUV. Therefore, SP500 must receive a lower allocation than LUV in your portfolio. SP500 index usually has shorter drawdown period than LUV.

On a general note (since you are interested in LUV), two instruments that have been extremely volatile in recent times are ICPT and OPNT. Investors in these instruments should consider reducing their exposure (to ICPT and OPNT) and diversifying their portfolios.

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