Correlation Between Alaska Air and KNOT Offshore
Can any of the company-specific risk be diversified away by investing in both Alaska Air and KNOT Offshore 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 KNOT Offshore 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 KNOT Offshore Partners, you can compare the effects of market volatilities on Alaska Air and KNOT Offshore 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 KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and KNOT Offshore.
Diversification Opportunities for Alaska Air and KNOT Offshore
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alaska and KNOT is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners 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 KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Alaska Air i.e., Alaska Air and KNOT Offshore go up and down completely randomly.
Pair Corralation between Alaska Air and KNOT Offshore
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.15 times more return on investment than KNOT Offshore. However, Alaska Air is 1.15 times more volatile than KNOT Offshore Partners. It trades about 0.29 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about -0.01 per unit of risk. If you would invest 4,723 in Alaska Air Group on September 3, 2024 and sell it today you would earn a total of 537.00 from holding Alaska Air Group or generate 11.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. KNOT Offshore Partners
Performance |
| Timeline |
| Alaska Air Group |
| KNOT Offshore Partners |
Alaska Air and KNOT Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and KNOT Offshore
The main advantage of trading using opposite Alaska Air and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, KNOT Offshore 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 KNOT Offshore will offset losses from the drop in KNOT Offshore's long position.| Alaska Air vs. Copa Holdings SA | Alaska Air vs. SkyWest | Alaska Air vs. Air Transport Services | Alaska Air vs. Mesa Air Group |
| KNOT Offshore vs. International Seaways | KNOT Offshore vs. Scorpio Tankers | KNOT Offshore vs. Dorian LPG | KNOT Offshore vs. Teekay Tankers |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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