Correlation Between Alaska Air and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Aristocrat Leisure 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 Aristocrat Leisure 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 Aristocrat Leisure Limited, you can compare the effects of market volatilities on Alaska Air and Aristocrat Leisure 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 Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Aristocrat Leisure.
Diversification Opportunities for Alaska Air and Aristocrat Leisure
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alaska and Aristocrat is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Alaska Air i.e., Alaska Air and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Alaska Air and Aristocrat Leisure
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 2.09 times more return on investment than Aristocrat Leisure. However, Alaska Air is 2.09 times more volatile than Aristocrat Leisure Limited. It trades about 0.29 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about -0.03 per unit of risk. If you would invest 4,977 in Alaska Air Group on October 30, 2024 and sell it today you would earn a total of 1,701 from holding Alaska Air Group or generate 34.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Aristocrat Leisure Limited
Performance |
| Timeline |
| Alaska Air Group |
| Aristocrat Leisure |
Alaska Air and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Aristocrat Leisure
The main advantage of trading using opposite Alaska Air and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.| Alaska Air vs. NIGHTINGALE HEALTH EO | Alaska Air vs. Phibro Animal Health | Alaska Air vs. RCI Hospitality Holdings | Alaska Air vs. Coffee Holding Co |
| Aristocrat Leisure vs. Q2M Managementberatung AG | Aristocrat Leisure vs. PKSHA TECHNOLOGY INC | Aristocrat Leisure vs. Sims Metal Management | Aristocrat Leisure vs. Check Point Software |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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