Correlation Between Alaska Air and United States

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

Diversification Opportunities for Alaska Air and United States

-0.66

Correlation Coefficient

Alaska Air  United States

Excellent diversification

The 3 months correlation between Alaska and United is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Alaska Air i.e., Alaska Air and United States go up and down completely randomly.

Pair Corralation between Alaska Air and United States

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.68 times more return on investment than United States. However, Alaska Air Group is 1.46 times less risky than United States. It trades about 0.04 of its potential returns per unit of risk. United States Steel is currently generating about 0.03 per unit of risk. If you would invest  4,982  in Alaska Air Group on October 11, 2024 and sell it today you would earn a total of  1,647  from holding Alaska Air Group or generate 33.06% return on investment over 90 days.

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

Alaska Air Group  vs.  United States Steel

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.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alaska Air and United States

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

The idea behind Alaska Air Group and United States Steel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.