Correlation Between Alaska Air and China Resources

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

Diversification Opportunities for Alaska Air and China Resources

-0.65

Correlation Coefficient

Alaska Air  China Resources

Excellent diversification

The 3 months correlation between Alaska and China is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Alaska Air i.e., Alaska Air and China Resources go up and down completely randomly.

Pair Corralation between Alaska Air and China Resources

Assuming the 90 days trading horizon Alaska Air Group is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Alaska Air Group is 1.11 times less risky than China Resources. The stock trades about -0.13 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  310.00  in China Resources Beer on December 29, 2024 and sell it today you would earn a total of  30.00  from holding China Resources Beer or generate 9.68% return on investment over 90 days.

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

Alaska Air Group  vs.  China Resources Beer

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

China Resources Beer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alaska Air and China Resources

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

The idea behind Alaska Air Group and China Resources Beer 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.