Correlation Between Alaska Air and Derwent London
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Derwent London 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 Derwent London 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 Derwent London PLC, you can compare the effects of market volatilities on Alaska Air and Derwent London 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 Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Derwent London.
Diversification Opportunities for Alaska Air and Derwent London
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alaska and Derwent is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC 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 Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of Alaska Air i.e., Alaska Air and Derwent London go up and down completely randomly.
Pair Corralation between Alaska Air and Derwent London
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.16 times more return on investment than Derwent London. However, Alaska Air is 1.16 times more volatile than Derwent London PLC. It trades about 0.09 of its potential returns per unit of risk. Derwent London PLC is currently generating about 0.01 per unit of risk. If you would invest 3,731 in Alaska Air Group on September 14, 2024 and sell it today you would earn a total of 2,526 from holding Alaska Air Group or generate 67.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 68.77% |
| Values | Daily Returns |
Alaska Air Group vs. Derwent London PLC
Performance |
| Timeline |
| Alaska Air Group |
| Derwent London PLC |
Alaska Air and Derwent London Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Derwent London
The main advantage of trading using opposite Alaska Air and Derwent London positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Derwent London 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 Derwent London will offset losses from the drop in Derwent London's long position.| Alaska Air vs. Southwest Airlines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. Frontier Group Holdings |
| Derwent London vs. Delta Air Lines | Derwent London vs. Compania Cervecerias Unidas | Derwent London vs. Alaska Air Group | Derwent London vs. Boston Beer |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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