Correlation Between Alaska Air and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Unilever PLC 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 Unilever PLC 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 Unilever PLC, you can compare the effects of market volatilities on Alaska Air and Unilever PLC 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 Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Unilever PLC.
Diversification Opportunities for Alaska Air and Unilever PLC
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alaska and Unilever is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of Alaska Air i.e., Alaska Air and Unilever PLC go up and down completely randomly.
Pair Corralation between Alaska Air and Unilever PLC
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 2.13 times more return on investment than Unilever PLC. However, Alaska Air is 2.13 times more volatile than Unilever PLC. It trades about 0.1 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.09 per unit of risk. If you would invest 4,195 in Alaska Air Group on September 1, 2024 and sell it today you would earn a total of 1,070 from holding Alaska Air Group or generate 25.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Unilever PLC
Performance |
| Timeline |
| Alaska Air Group |
| Unilever PLC |
Alaska Air and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Unilever PLC
The main advantage of trading using opposite Alaska Air and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Unilever PLC 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 Unilever PLC will offset losses from the drop in Unilever PLC's long position.| Alaska Air vs. Solstad Offshore ASA | Alaska Air vs. Samsung Electronics Co | Alaska Air vs. Gaztransport et Technigaz | Alaska Air vs. European Metals Holdings |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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