Correlation Between Alaska Air and RadNet

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

Diversification Opportunities for Alaska Air and RadNet

-0.41

Correlation Coefficient

Alaska Air  RadNet

Very good diversification

The 3 months correlation between Alaska and RadNet is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet Inc 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of Alaska Air i.e., Alaska Air and RadNet go up and down completely randomly.

Pair Corralation between Alaska Air and RadNet

Considering the 90-day investment horizon Alaska Air is expected to generate 3.13 times less return on investment than RadNet. But when comparing it to its historical volatility, Alaska Air Group is 1.18 times less risky than RadNet. It trades about 0.04 of its potential returns per unit of risk. RadNet Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,104  in RadNet Inc on October 26, 2024 and sell it today you would earn a total of  4,304  from holding RadNet Inc or generate 204.56% return on investment over 90 days.

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

Alaska Air Group  vs.  RadNet Inc

Alaska Air Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

RadNet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RadNet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RadNet 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 RadNet

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

The idea behind Alaska Air Group and RadNet Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.