Correlation Between Alaska Air and Universal Health
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Universal Health 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 Universal Health 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 Universal Health Services, you can compare the effects of market volatilities on Alaska Air and Universal Health 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 Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Universal Health.
Diversification Opportunities for Alaska Air and Universal Health
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alaska and Universal is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Alaska Air i.e., Alaska Air and Universal Health go up and down completely randomly.
Pair Corralation between Alaska Air and Universal Health
Assuming the 90 days trading horizon Alaska Air is expected to generate 2.2 times less return on investment than Universal Health. In addition to that, Alaska Air is 1.12 times more volatile than Universal Health Services. It trades about 0.03 of its total potential returns per unit of risk. Universal Health Services is currently generating about 0.07 per unit of volatility. If you would invest 12,593 in Universal Health Services on August 30, 2024 and sell it today you would earn a total of 7,735 from holding Universal Health Services or generate 61.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 84.88% |
| Values | Daily Returns |
Alaska Air Group vs. Universal Health Services
Performance |
| Timeline |
| Alaska Air Group |
| Universal Health Services |
Alaska Air and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Universal Health
The main advantage of trading using opposite Alaska Air and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Universal Health 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 Universal Health will offset losses from the drop in Universal Health's long position.| Alaska Air vs. Tungsten West PLC | Alaska Air vs. Argo Group Limited | Alaska Air vs. Hardide PLC | Alaska Air vs. Versarien PLC |
| Universal Health vs. Tungsten West PLC | Universal Health vs. Argo Group Limited | Universal Health vs. Hardide PLC | Universal Health 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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