Correlation Between Unity Software and Alaska Air

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

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

Diversification Opportunities for Unity Software and Alaska Air

0.71

Correlation Coefficient

Unity Software  Alaska Air

Poor diversification

The 3 months correlation between Unity and Alaska is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software 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 Unity Software 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 Unity Software 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 Unity Software i.e., Unity Software and Alaska Air go up and down completely randomly.

Pair Corralation between Unity Software and Alaska Air

Assuming the 90 days trading horizon Unity Software is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, Unity Software is 1.22 times less risky than Alaska Air. The stock trades about -0.14 of its potential returns per unit of risk. The Alaska Air Group, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  34,066  in Alaska Air Group, on October 11, 2024 and sell it today you would earn a total of  6,034  from holding Alaska Air Group, or generate 17.71% return on investment over 90 days.

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

Unity Software  vs.  Alaska Air Group,

Unity Software

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Unity Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Alaska Air Group,

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group, are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Alaska Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Software and Alaska Air

The main advantage of trading using opposite Unity Software and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Software 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 Unity Software 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.