Correlation Between Alaska Air and EssilorLuxottica
Can any of the company-specific risk be diversified away by investing in both Alaska Air and EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica Socit anonyme, you can compare the effects of market volatilities on Alaska Air and EssilorLuxottica 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 EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and EssilorLuxottica.
Diversification Opportunities for Alaska Air and EssilorLuxottica
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and EssilorLuxottica is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit 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 EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica Socit has no effect on the direction of Alaska Air i.e., Alaska Air and EssilorLuxottica go up and down completely randomly.
Pair Corralation between Alaska Air and EssilorLuxottica
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.85 times more return on investment than EssilorLuxottica. However, Alaska Air is 1.85 times more volatile than EssilorLuxottica Socit anonyme. It trades about 0.1 of its potential returns per unit of risk. EssilorLuxottica Socit anonyme is currently generating about 0.08 per unit of risk. If you would invest 3,841 in Alaska Air Group on August 29, 2024 and sell it today you would earn a total of 1,128 from holding Alaska Air Group or generate 29.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. EssilorLuxottica Socit anonyme
Performance |
| Timeline |
| Alaska Air Group |
| EssilorLuxottica Socit |
Alaska Air and EssilorLuxottica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and EssilorLuxottica
The main advantage of trading using opposite Alaska Air and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, EssilorLuxottica 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 EssilorLuxottica will offset losses from the drop in EssilorLuxottica's long position.The idea behind Alaska Air Group and EssilorLuxottica Socit anonyme 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.| EssilorLuxottica vs. Cars Inc | EssilorLuxottica vs. Grupo Carso SAB | EssilorLuxottica vs. Commercial Vehicle Group | EssilorLuxottica 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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