Correlation Between Southwest Airlines and Catalyst Media

Can any of the company-specific risk be diversified away by investing in both Southwest Airlines and Catalyst 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 Catalyst 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 Catalyst Media Group, you can compare the effects of market volatilities on Southwest Airlines and Catalyst 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 Catalyst Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Airlines and Catalyst Media.

Diversification Opportunities for Southwest Airlines and Catalyst Media

-0.52

Correlation Coefficient

Southwest Airlines  Catalyst Media

Excellent diversification

The 3 months correlation between Southwest and Catalyst is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Airlines Co and Catalyst Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Media Group 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 Catalyst Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Media Group has no effect on the direction of Southwest Airlines i.e., Southwest Airlines and Catalyst Media go up and down completely randomly.

Pair Corralation between Southwest Airlines and Catalyst Media

Assuming the 90 days trading horizon Southwest Airlines Co is expected to generate 1.3 times more return on investment than Catalyst Media. However, Southwest Airlines is 1.3 times more volatile than Catalyst Media Group. It trades about 0.01 of its potential returns per unit of risk. Catalyst Media Group is currently generating about -0.05 per unit of risk. If you would invest  3,464  in Southwest Airlines Co on October 10, 2024 and sell it today you would lose (187.00) from holding Southwest Airlines Co or give up 5.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Southwest Airlines Co  vs.  Catalyst Media Group

Southwest Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Catalyst Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Southwest Airlines and Catalyst Media

The main advantage of trading using opposite Southwest Airlines and Catalyst Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Airlines position performs unexpectedly, Catalyst 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 Catalyst Media will offset losses from the drop in Catalyst Media's long position.

The idea behind Southwest Airlines Co and Catalyst Media Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.