Correlation Between American Airlines and Alaska Air
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Alaska Air Group,, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Alaska Air.
Diversification Opportunities for American Airlines and Alaska Air
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Alaska is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group 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 American Airlines 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 American Airlines Group 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 American Airlines i.e., American Airlines and Alaska Air go up and down completely randomly.
Pair Corralation between American Airlines and Alaska Air
Assuming the 90 days trading horizon American Airlines is expected to generate 5.12 times less return on investment than Alaska Air. But when comparing it to its historical volatility, American Airlines Group is 3.0 times less risky than Alaska Air. It trades about 0.11 of its potential returns per unit of risk. Alaska Air Group, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 34,066 in Alaska Air Group, on October 10, 2024 and sell it today you would earn a total of 5,994 from holding Alaska Air Group, or generate 17.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Alaska Air Group,
Performance |
| Timeline |
| American Airlines |
| Alaska Air Group, |
American Airlines and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Alaska Air
The main advantage of trading using opposite American Airlines and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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.| American Airlines vs. MAHLE Metal Leve | American Airlines vs. METISA Metalrgica Timboense | American Airlines vs. New Oriental Education |
| Alaska Air vs. United Rentals | Alaska Air vs. Sumitomo Mitsui Financial | Alaska Air vs. salesforce inc | Alaska Air vs. Prudential Financial |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |