Correlation Between Alaska Air and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Major Drilling 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 Major Drilling 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 Major Drilling Group, you can compare the effects of market volatilities on Alaska Air and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Major Drilling.
Diversification Opportunities for Alaska Air and Major Drilling
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alaska and Major is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Alaska Air i.e., Alaska Air and Major Drilling go up and down completely randomly.
Pair Corralation between Alaska Air and Major Drilling
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.02 times more return on investment than Major Drilling. However, Alaska Air is 1.02 times more volatile than Major Drilling Group. It trades about 0.04 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.01 per unit of risk. If you would invest 4,547 in Alaska Air Group on October 13, 2024 and sell it today you would earn a total of 1,877 from holding Alaska Air Group or generate 41.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Alaska Air Group vs. Major Drilling Group
Performance |
Timeline |
Alaska Air Group |
Major Drilling Group |
Alaska Air and Major Drilling Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alaska Air and Major Drilling
The main advantage of trading using opposite Alaska Air and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.Alaska Air vs. MOVIE GAMES SA | Alaska Air vs. MCEWEN MINING INC | Alaska Air vs. Calibre Mining Corp | Alaska Air vs. MAGNUM MINING EXP |
Major Drilling vs. OFFICE DEPOT | Major Drilling vs. RYU Apparel | Major Drilling vs. VITEC SOFTWARE GROUP | Major Drilling vs. KENEDIX OFFICE INV |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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