Correlation Between Southwest Airlines and Take Two
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Take Two 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 Take Two 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 Take Two Interactive Software, you can compare the effects of market volatilities on Southwest Airlines and Take Two 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 Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Take Two.
Diversification Opportunities for Southwest Airlines and Take Two
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Take is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Take Two go up and down completely randomly.
Pair Corralation between Southwest Airlines and Take Two
Assuming the 90 days trading horizon Southwest Airlines Co is expected to under-perform the Take Two. In addition to that, Southwest Airlines is 1.18 times more volatile than Take Two Interactive Software. It trades about -0.18 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about -0.05 per unit of volatility. If you would invest 18,669 in Take Two Interactive Software on October 26, 2024 and sell it today you would lose (320.00) from holding Take Two Interactive Software or give up 1.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. Take Two Interactive Software
Performance |
| Timeline |
| Southwest Airlines |
| Take Two Interactive |
Southwest Airlines and Take Two Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and Take Two
The main advantage of trading using opposite Southwest Airlines and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Take Two 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 Take Two will offset losses from the drop in Take Two's long position.| Southwest Airlines vs. Fevertree Drinks Plc | Southwest Airlines vs. Empire Metals Limited | Southwest Airlines vs. Associated British Foods | Southwest Airlines vs. URU Metals |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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