Correlation Between Alaska Air and Air Products
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Air Products 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 Alaska Air and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Air Products Chemicals, you can compare the effects of market volatilities on Alaska Air and Air Products 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 Alaska Air with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Air Products.
Diversification Opportunities for Alaska Air and Air Products
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and Air is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Alaska Air 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 Alaska Air Group are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Alaska Air i.e., Alaska Air and Air Products go up and down completely randomly.
Pair Corralation between Alaska Air and Air Products
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.35 times more return on investment than Air Products. However, Alaska Air is 1.35 times more volatile than Air Products Chemicals. It trades about 0.31 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.21 per unit of risk. If you would invest 4,738 in Alaska Air Group on August 30, 2024 and sell it today you would earn a total of 542.00 from holding Alaska Air Group or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Air Products Chemicals
Performance |
| Timeline |
| Alaska Air Group |
| Air Products Chemicals |
Alaska Air and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Air Products
The main advantage of trading using opposite Alaska Air and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Alaska Air vs. Tungsten West PLC | Alaska Air vs. Argo Group Limited | Alaska Air vs. Hardide PLC | Alaska Air vs. Versarien PLC |
| Air Products vs. Tungsten West PLC | Air Products vs. Argo Group Limited | Air Products vs. Hardide PLC | Air Products vs. Versarien PLC |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Stocks Directory Find actively traded stocks across global markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |