Correlation Between Alaska Air and Xunlei

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

Diversification Opportunities for Alaska Air and Xunlei

0.14

Correlation Coefficient

Alaska Air  Xunlei

Average diversification

The 3 months correlation between Alaska and Xunlei is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Alaska Air i.e., Alaska Air and Xunlei go up and down completely randomly.

Pair Corralation between Alaska Air and Xunlei

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.65 times more return on investment than Xunlei. However, Alaska Air Group is 1.53 times less risky than Xunlei. It trades about 0.04 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.01 per unit of risk. If you would invest  5,010  in Alaska Air Group on October 12, 2024 and sell it today you would earn a total of  1,808  from holding Alaska Air Group or generate 36.09% return on investment over 90 days.

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

Alaska Air Group  vs.  Xunlei Ltd Adr

Alaska Air Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 22 (%) 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.

Xunlei Ltd Adr

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xunlei Ltd Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Xunlei is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alaska Air and Xunlei

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

The idea behind Alaska Air Group and Xunlei Ltd Adr 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.