Correlation Between Alaska Air and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on Alaska Air and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Pentair PLC.
Diversification Opportunities for Alaska Air and Pentair PLC
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alaska and Pentair is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Alaska Air i.e., Alaska Air and Pentair PLC go up and down completely randomly.
Pair Corralation between Alaska Air and Pentair PLC
Considering the 90-day investment horizon Alaska Air Group is expected to generate 2.03 times more return on investment than Pentair PLC. However, Alaska Air is 2.03 times more volatile than Pentair PLC. It trades about 0.29 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.4 per unit of risk. If you would invest 4,710 in Alaska Air Group on August 27, 2024 and sell it today you would earn a total of 634.00 from holding Alaska Air Group or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Pentair PLC
Performance |
| Timeline |
| Alaska Air Group |
| Pentair PLC |
Alaska Air and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Pentair PLC
The main advantage of trading using opposite Alaska Air and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC'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 |
| Pentair PLC vs. Aquagold International | Pentair PLC vs. Morningstar Unconstrained Allocation | Pentair PLC vs. High Yield Municipal Fund | Pentair PLC vs. Thrivent High Yield |
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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