Correlation Between Alaska Air and Capgemini

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

Diversification Opportunities for Alaska Air and Capgemini

-0.92

Correlation Coefficient

Alaska Air  Capgemini

Pay attention - limited upside

The 3 months correlation between Alaska and Capgemini is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini 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 Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of Alaska Air i.e., Alaska Air and Capgemini go up and down completely randomly.

Pair Corralation between Alaska Air and Capgemini

Assuming the 90 days trading horizon Alaska Air Group is expected to generate 2.39 times more return on investment than Capgemini. However, Alaska Air is 2.39 times more volatile than Capgemini SE. It trades about 0.27 of its potential returns per unit of risk. Capgemini SE is currently generating about -0.06 per unit of risk. If you would invest  4,843  in Alaska Air Group on September 13, 2024 and sell it today you would earn a total of  959.00  from holding Alaska Air Group or generate 19.8% return on investment over 90 days.

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

Alaska Air Group  vs.  Capgemini SE

Alaska Air Group

Risk-Adjusted Performance

23 of 100

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.

Capgemini SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alaska Air and Capgemini

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

The idea behind Alaska Air Group and Capgemini 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.