Correlation Between Alaska Air and Home Depot
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Alaska Air and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Home Depot.
Diversification Opportunities for Alaska Air and Home Depot
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and Home is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Alaska Air i.e., Alaska Air and Home Depot go up and down completely randomly.
Pair Corralation between Alaska Air and Home Depot
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 10.02 times more return on investment than Home Depot. However, Alaska Air is 10.02 times more volatile than Home Depot. It trades about 0.03 of its potential returns per unit of risk. Home Depot is currently generating about 0.09 per unit of risk. If you would invest 5,341 in Alaska Air Group on October 28, 2024 and sell it today you would earn a total of 1,530 from holding Alaska Air Group or generate 28.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.81% |
| Values | Daily Returns |
Alaska Air Group vs. Home Depot
Performance |
| Timeline |
| Alaska Air Group |
| Home Depot |
Alaska Air and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Home Depot
The main advantage of trading using opposite Alaska Air and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Alaska Air vs. Cellnex Telecom SA | Alaska Air vs. Charter Communications Cl | Alaska Air vs. Batm Advanced Communications | Alaska Air vs. Compal Electronics GDR |
| Home Depot vs. Creo Medical Group | Home Depot vs. Sovereign Metals | Home Depot vs. European Metals Holdings | Home Depot vs. Jacquet Metal Service |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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