Correlation Between British American and Alaska Air
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Alaska Air Group, you can compare the effects of market volatilities on British American 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 British American with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Alaska Air.
Diversification Opportunities for British American and Alaska Air
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Alaska is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco 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 British American 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 British American Tobacco 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 British American i.e., British American and Alaska Air go up and down completely randomly.
Pair Corralation between British American and Alaska Air
Assuming the 90 days trading horizon British American is expected to generate 1.71 times less return on investment than Alaska Air. But when comparing it to its historical volatility, British American Tobacco is 1.14 times less risky than Alaska Air. It trades about 0.27 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 6,404 in Alaska Air Group on November 3, 2024 and sell it today you would earn a total of 1,019 from holding Alaska Air Group or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Alaska Air Group
Performance |
| Timeline |
| British American Tobacco |
| Alaska Air Group |
British American and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Alaska Air
The main advantage of trading using opposite British American and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Edita Food Industries | British American vs. Jupiter Fund Management | British American vs. Leroy Seafood Group | British American vs. Applied Materials |
| Alaska Air vs. Sovereign Metals | Alaska Air vs. Europa Metals | Alaska Air vs. Alfa Financial Software | Alaska Air vs. Sabien Technology Group |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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