Correlation Between Alaska Air and Sabien Technology

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Can any of the company-specific risk be diversified away by investing in both Alaska Air and Sabien Technology 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 Sabien Technology 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 Sabien Technology Group, you can compare the effects of market volatilities on Alaska Air and Sabien Technology 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 Sabien Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Sabien Technology.

Diversification Opportunities for Alaska Air and Sabien Technology

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Alaska and Sabien is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Sabien Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabien Technology 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 Sabien Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabien Technology has no effect on the direction of Alaska Air i.e., Alaska Air and Sabien Technology go up and down completely randomly.

Pair Corralation between Alaska Air and Sabien Technology

Assuming the 90 days trading horizon Alaska Air Group is expected to generate 0.68 times more return on investment than Sabien Technology. However, Alaska Air Group is 1.48 times less risky than Sabien Technology. It trades about 0.1 of its potential returns per unit of risk. Sabien Technology Group is currently generating about -0.28 per unit of risk. If you would invest  6,721  in Alaska Air Group on October 26, 2024 and sell it today you would earn a total of  211.00  from holding Alaska Air Group or generate 3.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.0%
ValuesDaily Returns

Alaska Air Group  vs.  Sabien Technology Group

 Performance 
       Timeline  
Alaska Air Group 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.
Sabien Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sabien Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sabien Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alaska Air and Sabien Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alaska Air and Sabien Technology

The main advantage of trading using opposite Alaska Air and Sabien Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Sabien Technology 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 Sabien Technology will offset losses from the drop in Sabien Technology's long position.
The idea behind Alaska Air Group and Sabien Technology 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.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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