Correlation Between Alaska Air and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Compass Diversified 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 Compass Diversified 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 Compass Diversified Holdings, you can compare the effects of market volatilities on Alaska Air and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Compass Diversified.
Diversification Opportunities for Alaska Air and Compass Diversified
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alaska and Compass is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Alaska Air i.e., Alaska Air and Compass Diversified go up and down completely randomly.
Pair Corralation between Alaska Air and Compass Diversified
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.3 times more return on investment than Compass Diversified. However, Alaska Air is 1.3 times more volatile than Compass Diversified Holdings. It trades about 0.45 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.13 per unit of risk. If you would invest 6,440 in Alaska Air Group on November 7, 2024 and sell it today you would earn a total of 1,115 from holding Alaska Air Group or generate 17.31% 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. Compass Diversified Holdings
Performance |
| Timeline |
| Alaska Air Group |
| Compass Diversified |
Alaska Air and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Compass Diversified
The main advantage of trading using opposite Alaska Air and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Alaska Air vs. Delta Air Lines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. American Airlines Group | Alaska Air vs. JetBlue Airways Corp |
| Compass Diversified vs. Inter Parfums | Compass Diversified vs. MYR Group | Compass Diversified vs. Skechers USA | Compass Diversified vs. Titan International |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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