Correlation Between Alaska Air and Gap,

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

Diversification Opportunities for Alaska Air and Gap,

0.77

Correlation Coefficient

Alaska Air  Gap,

Poor diversification

The 3 months correlation between Alaska and Gap, is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Alaska Air i.e., Alaska Air and Gap, go up and down completely randomly.

Pair Corralation between Alaska Air and Gap,

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.94 times more return on investment than Gap,. However, Alaska Air Group is 1.06 times less risky than Gap,. It trades about 0.26 of its potential returns per unit of risk. The Gap, is currently generating about 0.12 per unit of risk. If you would invest  4,134  in Alaska Air Group on September 15, 2024 and sell it today you would earn a total of  2,123  from holding Alaska Air Group or generate 51.35% return on investment over 90 days.

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

Alaska Air Group  vs.  The Gap,

Alaska Air Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and Gap,

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

The idea behind Alaska Air Group and The Gap, 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.