Correlation Between Alaska Air and RBC Bearings

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

Diversification Opportunities for Alaska Air and RBC Bearings

0.35

Correlation Coefficient

Alaska Air  RBC Bearings

Weak diversification

The 3 months correlation between Alaska and RBC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Alaska Air i.e., Alaska Air and RBC Bearings go up and down completely randomly.

Pair Corralation between Alaska Air and RBC Bearings

Considering the 90-day investment horizon Alaska Air Group is expected to under-perform the RBC Bearings. In addition to that, Alaska Air is 1.44 times more volatile than RBC Bearings Incorporated. It trades about -0.12 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.09 per unit of volatility. If you would invest  30,393  in RBC Bearings Incorporated on December 26, 2024 and sell it today you would earn a total of  2,948  from holding RBC Bearings Incorporated or generate 9.7% return on investment over 90 days.

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

Alaska Air Group  vs.  RBC Bearings Incorporated

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. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

RBC Bearings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alaska Air and RBC Bearings

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

The idea behind Alaska Air Group and RBC Bearings Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.