Correlation Between Alaska Air and KVH Industries
Can any of the company-specific risk be diversified away by investing in both Alaska Air and KVH Industries 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 KVH Industries 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 KVH Industries, you can compare the effects of market volatilities on Alaska Air and KVH Industries 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 KVH Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and KVH Industries.
Diversification Opportunities for Alaska Air and KVH Industries
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alaska and KVH is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries 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 KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Alaska Air i.e., Alaska Air and KVH Industries go up and down completely randomly.
Pair Corralation between Alaska Air and KVH Industries
Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.87 times more return on investment than KVH Industries. However, Alaska Air Group is 1.14 times less risky than KVH Industries. It trades about 0.1 of its potential returns per unit of risk. KVH Industries is currently generating about 0.04 per unit of risk. If you would invest 3,626 in Alaska Air Group on August 29, 2024 and sell it today you would earn a total of 1,667 from holding Alaska Air Group or generate 45.97% 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. KVH Industries
Performance |
| Timeline |
| Alaska Air Group |
| KVH Industries |
Alaska Air and KVH Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and KVH Industries
The main advantage of trading using opposite Alaska Air and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, KVH Industries 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 KVH Industries will offset losses from the drop in KVH Industries' 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 |
| KVH Industries vs. NETGEAR | KVH Industries vs. Merck Company | KVH Industries vs. Pharvaris BV | KVH Industries vs. Brinker 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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