Correlation Between Alaska Air and AIA Group
Can any of the company-specific risk be diversified away by investing in both Alaska Air and AIA Group 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 AIA Group 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 AIA Group Limited, you can compare the effects of market volatilities on Alaska Air and AIA Group 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 AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and AIA Group.
Diversification Opportunities for Alaska Air and AIA Group
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alaska and AIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and AIA Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group Limited 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 AIA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA Group Limited has no effect on the direction of Alaska Air i.e., Alaska Air and AIA Group go up and down completely randomly.
Pair Corralation between Alaska Air and AIA Group
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 0.95 times more return on investment than AIA Group. However, Alaska Air Group is 1.05 times less risky than AIA Group. It trades about 0.1 of its potential returns per unit of risk. AIA Group Limited is currently generating about 0.04 per unit of risk. If you would invest 3,864 in Alaska Air Group on August 30, 2024 and sell it today you would earn a total of 1,138 from holding Alaska Air Group or generate 29.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. AIA Group Limited
Performance |
| Timeline |
| Alaska Air Group |
| AIA Group Limited |
Alaska Air and AIA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and AIA Group
The main advantage of trading using opposite Alaska Air and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, AIA Group 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 AIA Group will offset losses from the drop in AIA Group's long position.The idea behind Alaska Air Group and AIA Group Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| AIA Group vs. INTERCONT HOTELS | AIA Group vs. HF SINCLAIR P | AIA Group vs. Xenia Hotels Resorts | AIA Group vs. Alaska Air Group |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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