Correlation Between Alaska Air and CSX
Can any of the company-specific risk be diversified away by investing in both Alaska Air and CSX 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 CSX 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 CSX Corporation, you can compare the effects of market volatilities on Alaska Air and CSX 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 CSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and CSX.
Diversification Opportunities for Alaska Air and CSX
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alaska and CSX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation 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 CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of Alaska Air i.e., Alaska Air and CSX go up and down completely randomly.
Pair Corralation between Alaska Air and CSX
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 2.29 times more return on investment than CSX. However, Alaska Air is 2.29 times more volatile than CSX Corporation. It trades about 0.24 of its potential returns per unit of risk. CSX Corporation is currently generating about -0.23 per unit of risk. If you would invest 5,058 in Alaska Air Group on September 15, 2024 and sell it today you would earn a total of 916.00 from holding Alaska Air Group or generate 18.11% 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. CSX Corp.
Performance |
| Timeline |
| Alaska Air Group |
| CSX Corporation |
Alaska Air and CSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and CSX
The main advantage of trading using opposite Alaska Air and CSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, CSX 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 CSX will offset losses from the drop in CSX's long position.The idea behind Alaska Air Group and CSX Corporation 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.| CSX vs. GRIFFIN MINING LTD | CSX vs. Taiwan Semiconductor Manufacturing | CSX vs. GREENX METALS LTD | CSX vs. Elmos Semiconductor SE |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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