Correlation Between Alaska Air and Charles Schwab

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

Diversification Opportunities for Alaska Air and Charles Schwab

0.46

Correlation Coefficient

Alaska Air  Charles Schwab

Very weak diversification

The 3 months correlation between Alaska and Charles is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group, and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Alaska Air i.e., Alaska Air and Charles Schwab go up and down completely randomly.

Pair Corralation between Alaska Air and Charles Schwab

Assuming the 90 days trading horizon Alaska Air Group, is expected to under-perform the Charles Schwab. In addition to that, Alaska Air is 1.17 times more volatile than The Charles Schwab. It trades about -0.18 of its total potential returns per unit of risk. The Charles Schwab is currently generating about 0.0 per unit of volatility. If you would invest  5,787  in The Charles Schwab on December 25, 2024 and sell it today you would lose (52.00) from holding The Charles Schwab or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Alaska Air Group,  vs.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Charles Schwab has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Charles Schwab 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 Charles Schwab

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

The idea behind Alaska Air Group, and The Charles Schwab 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.