Correlation Between Dow Jones and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Alaska Air 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 Dow Jones and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Alaska Air Group,, you can compare the effects of market volatilities on Dow Jones and Alaska Air 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 Dow Jones with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Alaska Air.
Diversification Opportunities for Dow Jones and Alaska Air
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Alaska is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Alaska Air Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group, and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group, has no effect on the direction of Dow Jones i.e., Dow Jones and Alaska Air go up and down completely randomly.
Pair Corralation between Dow Jones and Alaska Air
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Alaska Air. However, Dow Jones Industrial is 3.13 times less risky than Alaska Air. It trades about -0.03 of its potential returns per unit of risk. Alaska Air Group, is currently generating about -0.18 per unit of risk. If you would invest 4,329,703 in Dow Jones Industrial on December 25, 2024 and sell it today you would lose (71,371) from holding Dow Jones Industrial or give up 1.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.33% |
Values | Daily Returns |
Dow Jones Industrial vs. Alaska Air Group,
Performance |
Timeline |
Dow Jones and Alaska Air Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Alaska Air Group,
Pair trading matchups for Alaska Air
Pair Trading with Dow Jones and Alaska Air
The main advantage of trading using opposite Dow Jones and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.Dow Jones vs. Canlan Ice Sports | Dow Jones vs. MYT Netherlands Parent | Dow Jones vs. Lipocine | Dow Jones vs. Webus International Limited |
Alaska Air vs. Liberty Broadband | Alaska Air vs. United Natural Foods, | Alaska Air vs. Metalurgica Gerdau SA | Alaska Air vs. Vulcan Materials |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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