Correlation Between Alaska Air and Jefferies Financial

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

Diversification Opportunities for Alaska Air and Jefferies Financial

0.71

Correlation Coefficient

Alaska Air  Jefferies Financial

Poor diversification

The 3 months correlation between Alaska and Jefferies is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group, and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial 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 Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of Alaska Air i.e., Alaska Air and Jefferies Financial go up and down completely randomly.

Pair Corralation between Alaska Air and Jefferies Financial

Assuming the 90 days trading horizon Alaska Air Group, is expected to under-perform the Jefferies Financial. But the stock apears to be less risky and, when comparing its historical volatility, Alaska Air Group, is 1.79 times less risky than Jefferies Financial. The stock trades about -0.12 of its potential returns per unit of risk. The Jefferies Financial Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  47,288  in Jefferies Financial Group on October 23, 2024 and sell it today you would lose (1,228) from holding Jefferies Financial Group or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alaska Air Group,  vs.  Jefferies Financial Group

Alaska Air Group,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group, are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Alaska Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Jefferies Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and Jefferies Financial

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

The idea behind Alaska Air Group, and Jefferies Financial 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.