Correlation Between Alaska Air and PLAYTECH

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

Diversification Opportunities for Alaska Air and PLAYTECH

-0.34

Correlation Coefficient

Alaska Air  PLAYTECH

Very good diversification

The 3 months correlation between Alaska and PLAYTECH is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and PLAYTECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTECH 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 PLAYTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTECH has no effect on the direction of Alaska Air i.e., Alaska Air and PLAYTECH go up and down completely randomly.

Pair Corralation between Alaska Air and PLAYTECH

Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.04 times more return on investment than PLAYTECH. However, Alaska Air is 1.04 times more volatile than PLAYTECH. It trades about 0.04 of its potential returns per unit of risk. PLAYTECH is currently generating about 0.04 per unit of risk. If you would invest  4,595  in Alaska Air Group on October 11, 2024 and sell it today you would earn a total of  1,743  from holding Alaska Air Group or generate 37.93% 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.  PLAYTECH

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 fragile basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

PLAYTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYTECH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PLAYTECH is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alaska Air and PLAYTECH

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

The idea behind Alaska Air Group and PLAYTECH 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.