Correlation Between Alaska Air and Martin Marietta

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Can any of the company-specific risk be diversified away by investing in both Alaska Air and Martin Marietta 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 Alaska Air and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Martin Marietta Materials, you can compare the effects of market volatilities on Alaska Air and Martin Marietta 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 Alaska Air with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Martin Marietta.

Diversification Opportunities for Alaska Air and Martin Marietta

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Alaska and Martin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Alaska Air 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 Alaska Air Group are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Alaska Air i.e., Alaska Air and Martin Marietta go up and down completely randomly.

Pair Corralation between Alaska Air and Martin Marietta

Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.75 times more return on investment than Martin Marietta. However, Alaska Air is 1.75 times more volatile than Martin Marietta Materials. It trades about 0.23 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.34 per unit of risk. If you would invest  5,069  in Alaska Air Group on October 7, 2024 and sell it today you would earn a total of  1,283  from holding Alaska Air Group or generate 25.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.48%
ValuesDaily Returns

Alaska Air Group  vs.  Martin Marietta Materials

 Performance 
       Timeline  
Alaska Air Group 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.
Martin Marietta Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Martin Marietta is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Alaska Air and Martin Marietta Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alaska Air and Martin Marietta

The main advantage of trading using opposite Alaska Air and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.
The idea behind Alaska Air Group and Martin Marietta Materials 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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