Correlation Between Alaska Air and SOUTHERN

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

Diversification Opportunities for Alaska Air and SOUTHERN

-0.38

Correlation Coefficient

Alaska Air  SOUTHERN

Very good diversification

The 3 months correlation between Alaska and SOUTHERN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Alaska Air i.e., Alaska Air and SOUTHERN go up and down completely randomly.

Pair Corralation between Alaska Air and SOUTHERN

Considering the 90-day investment horizon Alaska Air Group is expected to generate 10.45 times more return on investment than SOUTHERN. However, Alaska Air is 10.45 times more volatile than SOUTHERN PER CORP. It trades about 0.28 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about -0.08 per unit of risk. If you would invest  4,280  in Alaska Air Group on October 9, 2024 and sell it today you would earn a total of  2,160  from holding Alaska Air Group or generate 50.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Alaska Air Group  vs.  SOUTHERN PER CORP

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.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alaska Air and SOUTHERN

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

The idea behind Alaska Air Group and SOUTHERN PER CORP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.