Correlation Between United States and Alaska Air

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

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

Diversification Opportunities for United States and Alaska Air

-0.66

Correlation Coefficient

United States  Alaska Air

Excellent diversification

The 3 months correlation between United and Alaska is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Alaska Air go up and down completely randomly.

Pair Corralation between United States and Alaska Air

Taking into account the 90-day investment horizon United States is expected to generate 1.01 times less return on investment than Alaska Air. In addition to that, United States is 1.46 times more volatile than Alaska Air Group. It trades about 0.03 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.04 per unit of volatility. If you would invest  4,982  in Alaska Air Group on October 11, 2024 and sell it today you would earn a total of  1,647  from holding Alaska Air Group or generate 33.06% return on investment over 90 days.

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

United States Steel  vs.  Alaska Air Group

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 United States and Alaska Air

The main advantage of trading using opposite United States and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.