Correlation Between National CineMedia and Alaska Air

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

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

Diversification Opportunities for National CineMedia and Alaska Air

0.13

Correlation Coefficient

National CineMedia  Alaska Air

Average diversification

The 3 months correlation between National and Alaska is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia 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 National CineMedia 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 National CineMedia 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 National CineMedia i.e., National CineMedia and Alaska Air go up and down completely randomly.

Pair Corralation between National CineMedia and Alaska Air

Given the investment horizon of 90 days National CineMedia is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, National CineMedia is 1.82 times less risky than Alaska Air. The stock trades about -0.12 of its potential returns per unit of risk. The Alaska Air Group is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  5,293  in Alaska Air Group on September 27, 2024 and sell it today you would earn a total of  1,467  from holding Alaska Air Group or generate 27.72% return on investment over 90 days.

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

National CineMedia  vs.  Alaska Air Group

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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.

Pair Trading with National CineMedia and Alaska Air

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

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.