Correlation Between Applied Materials, and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Applied Materials, and Alaska Air 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 Applied Materials, and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials, and Alaska Air Group,, you can compare the effects of market volatilities on Applied Materials, and Alaska Air 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 Applied Materials, with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and Alaska Air.
Diversification Opportunities for Applied Materials, and Alaska Air
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and Alaska is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Alaska Air Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group, and Applied Materials, 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 Applied Materials, are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group, has no effect on the direction of Applied Materials, i.e., Applied Materials, and Alaska Air go up and down completely randomly.
Pair Corralation between Applied Materials, and Alaska Air
Assuming the 90 days trading horizon Applied Materials, is expected to generate 1.76 times less return on investment than Alaska Air. But when comparing it to its historical volatility, Applied Materials, is 1.01 times less risky than Alaska Air. It trades about 0.06 of its potential returns per unit of risk. Alaska Air Group, is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 18,696 in Alaska Air Group, on October 26, 2024 and sell it today you would earn a total of 23,184 from holding Alaska Air Group, or generate 124.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials, vs. Alaska Air Group,
Performance |
| Timeline |
| Applied Materials, |
| Alaska Air Group, |
Applied Materials, and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials, and Alaska Air
The main advantage of trading using opposite Applied Materials, and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials, position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.| Applied Materials, vs. Alaska Air Group, | Applied Materials, vs. Zoom Video Communications | Applied Materials, vs. Telecomunicaes Brasileiras SA | Applied Materials, vs. Marfrig Global Foods |
| Alaska Air vs. Align Technology | Alaska Air vs. Seagate Technology Holdings | Alaska Air vs. Electronic Arts | Alaska Air vs. STMicroelectronics NV |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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