Correlation Between Alaska Air and Datagroup

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

Diversification Opportunities for Alaska Air and Datagroup

-0.49

Correlation Coefficient

Alaska Air  Datagroup

Very good diversification

The 3 months correlation between Alaska and Datagroup is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Datagroup SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datagroup SE 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 Datagroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datagroup SE has no effect on the direction of Alaska Air i.e., Alaska Air and Datagroup go up and down completely randomly.

Pair Corralation between Alaska Air and Datagroup

Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.4 times more return on investment than Datagroup. However, Alaska Air is 1.4 times more volatile than Datagroup SE. It trades about 0.22 of its potential returns per unit of risk. Datagroup SE is currently generating about -0.07 per unit of risk. If you would invest  5,258  in Alaska Air Group on November 29, 2024 and sell it today you would earn a total of  2,033  from holding Alaska Air Group or generate 38.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alaska Air Group  vs.  Datagroup SE

Alaska Air Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Datagroup SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Datagroup SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alaska Air and Datagroup

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

The idea behind Alaska Air Group and Datagroup SE 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 Global Correlations module to find global opportunities by holding instruments from different markets.