Correlation Between TOWNSQUARE MEDIA and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both TOWNSQUARE MEDIA and Southwest Airlines 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 TOWNSQUARE MEDIA and Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOWNSQUARE MEDIA INC and Southwest Airlines Co, you can compare the effects of market volatilities on TOWNSQUARE MEDIA and Southwest Airlines 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 TOWNSQUARE MEDIA with a short position of Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOWNSQUARE MEDIA and Southwest Airlines.
Diversification Opportunities for TOWNSQUARE MEDIA and Southwest Airlines
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TOWNSQUARE and Southwest is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TOWNSQUARE MEDIA INC and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA INC are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of TOWNSQUARE MEDIA i.e., TOWNSQUARE MEDIA and Southwest Airlines go up and down completely randomly.
Pair Corralation between TOWNSQUARE MEDIA and Southwest Airlines
Assuming the 90 days trading horizon TOWNSQUARE MEDIA INC is expected to generate 1.18 times more return on investment than Southwest Airlines. However, TOWNSQUARE MEDIA is 1.18 times more volatile than Southwest Airlines Co. It trades about 0.04 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.03 per unit of risk. If you would invest 737.00 in TOWNSQUARE MEDIA INC on September 19, 2024 and sell it today you would earn a total of 193.00 from holding TOWNSQUARE MEDIA INC or generate 26.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOWNSQUARE MEDIA INC vs. Southwest Airlines Co
Performance |
| Timeline |
| TOWNSQUARE MEDIA INC |
| Southwest Airlines |
TOWNSQUARE MEDIA and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOWNSQUARE MEDIA and Southwest Airlines
The main advantage of trading using opposite TOWNSQUARE MEDIA and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOWNSQUARE MEDIA position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| TOWNSQUARE MEDIA vs. Apple Inc | TOWNSQUARE MEDIA vs. Apple Inc | TOWNSQUARE MEDIA vs. Apple Inc | TOWNSQUARE MEDIA vs. Apple Inc |
| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB | Southwest Airlines vs. Norsk Hydro ASA |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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