Correlation Between AmTrust Financial and Alaska Air
Can any of the company-specific risk be diversified away by investing in both AmTrust Financial 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 AmTrust Financial and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AmTrust Financial Services and Alaska Air Group, you can compare the effects of market volatilities on AmTrust Financial 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 AmTrust Financial with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Alaska Air.
Diversification Opportunities for AmTrust Financial and Alaska Air
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AmTrust and Alaska is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services 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 AmTrust Financial 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 AmTrust Financial Services 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 AmTrust Financial i.e., AmTrust Financial and Alaska Air go up and down completely randomly.
Pair Corralation between AmTrust Financial and Alaska Air
Assuming the 90 days horizon AmTrust Financial Services is expected to under-perform the Alaska Air. But the pink sheet apears to be less risky and, when comparing its historical volatility, AmTrust Financial Services is 1.19 times less risky than Alaska Air. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Alaska Air Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,723 in Alaska Air Group on September 5, 2024 and sell it today you would earn a total of 532.00 from holding Alaska Air Group or generate 11.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AmTrust Financial Services vs. Alaska Air Group
Performance |
| Timeline |
| AmTrust Financial |
| Alaska Air Group |
AmTrust Financial and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AmTrust Financial and Alaska Air
The main advantage of trading using opposite AmTrust Financial and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial 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.| AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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