Correlation Between Gap, and Alaska Air

Can any of the company-specific risk be diversified away by investing in both Gap, 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 Gap, and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Gap, and Alaska Air Group, you can compare the effects of market volatilities on Gap, 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 Gap, with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Alaska Air.

Diversification Opportunities for Gap, and Alaska Air

-0.6

Correlation Coefficient

Gap,  Alaska Air

Excellent diversification

The 3 months correlation between Gap, and Alaska is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, 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 Gap, 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 The Gap, 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 Gap, i.e., Gap, and Alaska Air go up and down completely randomly.

Pair Corralation between Gap, and Alaska Air

Considering the 90-day investment horizon The Gap, is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, The Gap, is 1.23 times less risky than Alaska Air. The stock trades about -0.24 of its potential returns per unit of risk. The Alaska Air Group is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  7,349  in Alaska Air Group on December 4, 2024 and sell it today you would lose (819.00) from holding Alaska Air Group or give up 11.14% of portfolio value over 90 days.

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

The Gap,  vs.  Alaska Air Group

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Alaska Air Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 9 (%) 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.

Pair Trading with Gap, and Alaska Air

The main advantage of trading using opposite Gap, and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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.

The idea behind The Gap, and Alaska Air Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.