Correlation Between Alaska Air and Gilead Sciences

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

Diversification Opportunities for Alaska Air and Gilead Sciences

-0.4

Correlation Coefficient

Alaska Air  Gilead Sciences

Very good diversification

The 3 months correlation between Alaska and Gilead is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group, and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences 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 Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of Alaska Air i.e., Alaska Air and Gilead Sciences go up and down completely randomly.

Pair Corralation between Alaska Air and Gilead Sciences

Assuming the 90 days trading horizon Alaska Air Group, is expected to under-perform the Gilead Sciences. In addition to that, Alaska Air is 1.39 times more volatile than Gilead Sciences. It trades about -0.18 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.05 per unit of volatility. If you would invest  28,876  in Gilead Sciences on December 24, 2024 and sell it today you would earn a total of  1,263  from holding Gilead Sciences or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alaska Air Group,  vs.  Gilead Sciences

Alaska Air Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alaska Air Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gilead Sciences

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Gilead Sciences is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alaska Air and Gilead Sciences

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

The idea behind Alaska Air Group, and Gilead Sciences 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.