Correlation Between Alaska Air and Titan Machinery

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

Diversification Opportunities for Alaska Air and Titan Machinery

0.69

Correlation Coefficient

Alaska Air  Titan Machinery

Poor diversification

The 3 months correlation between Alaska and Titan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Alaska Air i.e., Alaska Air and Titan Machinery go up and down completely randomly.

Pair Corralation between Alaska Air and Titan Machinery

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.85 times more return on investment than Titan Machinery. However, Alaska Air Group is 1.17 times less risky than Titan Machinery. It trades about 0.3 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.06 per unit of risk. If you would invest  3,976  in Alaska Air Group on September 18, 2024 and sell it today you would earn a total of  2,364  from holding Alaska Air Group or generate 59.46% 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.  Titan Machinery

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

Titan Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Titan Machinery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alaska Air and Titan Machinery

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

The idea behind Alaska Air Group and Titan Machinery 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.