Correlation Between New Era and Alaska Air

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

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

Diversification Opportunities for New Era and Alaska Air

-0.82

Correlation Coefficient

New Era  Alaska Air

Pay attention - limited upside

The 3 months correlation between New and Alaska is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding New Era Helium 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 New Era 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 New Era Helium 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 New Era i.e., New Era and Alaska Air go up and down completely randomly.

Pair Corralation between New Era and Alaska Air

Given the investment horizon of 90 days New Era Helium is expected to under-perform the Alaska Air. In addition to that, New Era is 3.98 times more volatile than Alaska Air Group. It trades about -0.42 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.35 per unit of volatility. If you would invest  5,344  in Alaska Air Group on September 25, 2024 and sell it today you would earn a total of  1,416  from holding Alaska Air Group or generate 26.5% return on investment over 90 days.

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

New Era Helium  vs.  Alaska Air Group

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alaska Air Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Era and Alaska Air

The main advantage of trading using opposite New Era and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Era 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 New Era Helium 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.