Correlation Between Rand Capital and Alaska Air

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

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

Diversification Opportunities for Rand Capital and Alaska Air

0.78

Correlation Coefficient

Rand Capital  Alaska Air

Poor diversification

The 3 months correlation between Rand and Alaska is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp 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 Rand Capital 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 Rand Capital Corp 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 Rand Capital i.e., Rand Capital and Alaska Air go up and down completely randomly.

Pair Corralation between Rand Capital and Alaska Air

Given the investment horizon of 90 days Rand Capital is expected to generate 1.05 times less return on investment than Alaska Air. In addition to that, Rand Capital is 1.17 times more volatile than Alaska Air Group. It trades about 0.15 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.18 per unit of volatility. If you would invest  4,009  in Alaska Air Group on September 27, 2024 and sell it today you would earn a total of  2,751  from holding Alaska Air Group or generate 68.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.4%
Values	Daily Returns

Rand Capital Corp  vs.  Alaska Air Group

Rand Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Rand Capital and Alaska Air

The main advantage of trading using opposite Rand Capital and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.