Correlation Between Alaska Air and ConocoPhillips

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

Diversification Opportunities for Alaska Air and ConocoPhillips

0.4

Correlation Coefficient

Alaska Air  ConocoPhillips

Very weak diversification

The 3 months correlation between Alaska and ConocoPhillips is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Alaska Air i.e., Alaska Air and ConocoPhillips go up and down completely randomly.

Pair Corralation between Alaska Air and ConocoPhillips

Assuming the 90 days trading horizon Alaska Air Group is expected to under-perform the ConocoPhillips. In addition to that, Alaska Air is 1.28 times more volatile than ConocoPhillips. It trades about -0.16 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.03 per unit of volatility. If you would invest  9,189  in ConocoPhillips on December 24, 2024 and sell it today you would earn a total of  252.00  from holding ConocoPhillips or generate 2.74% return on investment over 90 days.

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

Alaska Air Group  vs.  ConocoPhillips

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.

ConocoPhillips

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alaska Air and ConocoPhillips

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

The idea behind Alaska Air Group and ConocoPhillips 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.