Correlation Between Southwest Airlines and TOWNSQUARE MEDIA
Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA INC, you can compare the effects of market volatilities on Southwest Airlines and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and TOWNSQUARE MEDIA.
Diversification Opportunities for Southwest Airlines and TOWNSQUARE MEDIA
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and TOWNSQUARE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC 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 TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and TOWNSQUARE MEDIA go up and down completely randomly.
Pair Corralation between Southwest Airlines and TOWNSQUARE MEDIA
Assuming the 90 days horizon Southwest Airlines is expected to generate 3.76 times less return on investment than TOWNSQUARE MEDIA. But when comparing it to its historical volatility, Southwest Airlines Co is 1.23 times less risky than TOWNSQUARE MEDIA. It trades about 0.02 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 585.00 in TOWNSQUARE MEDIA INC on September 20, 2024 and sell it today you would earn a total of 325.00 from holding TOWNSQUARE MEDIA INC or generate 55.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Airlines Co vs. TOWNSQUARE MEDIA INC
Performance |
| Timeline |
| Southwest Airlines |
| TOWNSQUARE MEDIA INC |
Southwest Airlines and TOWNSQUARE MEDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Airlines and TOWNSQUARE MEDIA
The main advantage of trading using opposite Southwest Airlines and TOWNSQUARE MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA will offset losses from the drop in TOWNSQUARE MEDIA's long position.| Southwest Airlines vs. RYANAIR HLDGS ADR | Southwest Airlines vs. Superior Plus Corp | Southwest Airlines vs. SIVERS SEMICONDUCTORS AB | Southwest Airlines vs. Norsk Hydro ASA |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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