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 and SOUTHWEST AIRLINES, 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
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Townsquare and SOUTHWEST is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and SOUTHWEST AIRLINES 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 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 horizon Townsquare Media is expected to under-perform the SOUTHWEST AIRLINES. But the stock apears to be less risky and, when comparing its historical volatility, Townsquare Media is 1.25 times less risky than SOUTHWEST AIRLINES. The stock trades about -0.12 of its potential returns per unit of risk. The SOUTHWEST AIRLINES is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,796 in SOUTHWEST AIRLINES on August 29, 2024 and sell it today you would earn a total of 251.00 from holding SOUTHWEST AIRLINES or generate 8.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Townsquare Media vs. SOUTHWEST AIRLINES
Performance |
| Timeline |
| Townsquare Media |
| 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's long position.| Townsquare Media vs. Align Technology | Townsquare Media vs. Westinghouse Air Brake | Townsquare Media vs. Fair Isaac Corp | Townsquare Media vs. DELTA AIR LINES |
| SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Apple Inc | SOUTHWEST AIRLINES vs. Superior Plus Corp | SOUTHWEST AIRLINES vs. SIVERS SEMICONDUCTORS AB |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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