Correlation Between Catalyst Media and Southwest Airlines

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

Diversification Opportunities for Catalyst Media and Southwest Airlines

-0.54

Correlation Coefficient

Catalyst Media  Southwest Airlines

Excellent diversification

The 3 months correlation between Catalyst and Southwest is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Media Group and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines and Catalyst 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 Catalyst Media Group 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 Catalyst Media i.e., Catalyst Media and Southwest Airlines go up and down completely randomly.

Pair Corralation between Catalyst Media and Southwest Airlines

Assuming the 90 days trading horizon Catalyst Media Group is expected to generate 1.8 times more return on investment than Southwest Airlines. However, Catalyst Media is 1.8 times more volatile than Southwest Airlines Co. It trades about -0.01 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.19 per unit of risk. If you would invest  7,600  in Catalyst Media Group on October 25, 2024 and sell it today you would lose (100.00) from holding Catalyst Media Group or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Catalyst Media Group  vs.  Southwest Airlines Co

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.

Southwest Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines Co are ranked lower than 7 (%) 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.

Pair Trading with Catalyst Media and Southwest Airlines

The main advantage of trading using opposite Catalyst Media and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst 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.

The idea behind Catalyst Media Group and Southwest Airlines Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.