Correlation Between Alaska Air and GALP ENERGIA

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

Diversification Opportunities for Alaska Air and GALP ENERGIA

-0.06

Correlation Coefficient

Alaska Air  GALP ENERGIA

Good diversification

The 3 months correlation between Alaska and GALP is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B 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 GALP ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGIA B has no effect on the direction of Alaska Air i.e., Alaska Air and GALP ENERGIA go up and down completely randomly.

Pair Corralation between Alaska Air and GALP ENERGIA

Assuming the 90 days trading horizon Alaska Air is expected to generate 2.93 times less return on investment than GALP ENERGIA. But when comparing it to its historical volatility, Alaska Air Group is 1.34 times less risky than GALP ENERGIA. It trades about 0.09 of its potential returns per unit of risk. GALP ENERGIA B is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,620  in GALP ENERGIA B on October 22, 2024 and sell it today you would earn a total of  90.00  from holding GALP ENERGIA B or generate 5.56% return on investment over 90 days.

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

Alaska Air Group  vs.  GALP ENERGIA B

Alaska Air Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 22 (%) 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.

GALP ENERGIA B

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GALP ENERGIA B are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GALP ENERGIA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alaska Air and GALP ENERGIA

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

The idea behind Alaska Air Group and GALP ENERGIA B 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.