Correlation Between Alaska Air and Inflection Point

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

Diversification Opportunities for Alaska Air and Inflection Point

0.82

Correlation Coefficient

Alaska Air  Inflection Point

Very poor diversification

The 3 months correlation between Alaska and Inflection is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Inflection Point Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflection Point Acq 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 Inflection Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflection Point Acq has no effect on the direction of Alaska Air i.e., Alaska Air and Inflection Point go up and down completely randomly.

Pair Corralation between Alaska Air and Inflection Point

Considering the 90-day investment horizon Alaska Air Group is expected to generate 11.44 times more return on investment than Inflection Point. However, Alaska Air is 11.44 times more volatile than Inflection Point Acquisition. It trades about 0.3 of its potential returns per unit of risk. Inflection Point Acquisition is currently generating about 0.2 per unit of risk. If you would invest  3,590  in Alaska Air Group on September 2, 2024 and sell it today you would earn a total of  1,670  from holding Alaska Air Group or generate 46.52% return on investment over 90 days.

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

Alaska Air Group  vs.  Inflection Point Acquisition

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. Despite quite weak essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inflection Point Acq

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inflection Point Acquisition are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Inflection Point is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alaska Air and Inflection Point

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

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