Correlation Between Alaska Air and United Parks
Can any of the company-specific risk be diversified away by investing in both Alaska Air and United Parks 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 United Parks 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 United Parks Resorts, you can compare the effects of market volatilities on Alaska Air and United Parks 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 United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and United Parks.
Diversification Opportunities for Alaska Air and United Parks
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alaska and United is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Alaska Air i.e., Alaska Air and United Parks go up and down completely randomly.
Pair Corralation between Alaska Air and United Parks
Considering the 90-day investment horizon Alaska Air is expected to generate 1.1 times less return on investment than United Parks. But when comparing it to its historical volatility, Alaska Air Group is 1.22 times less risky than United Parks. It trades about 0.31 of its potential returns per unit of risk. United Parks Resorts is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,300 in United Parks Resorts on September 4, 2024 and sell it today you would earn a total of 729.00 from holding United Parks Resorts or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. United Parks Resorts
Performance |
| Timeline |
| Alaska Air Group |
| United Parks Resorts |
Alaska Air and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and United Parks
The main advantage of trading using opposite Alaska Air and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, United Parks 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 United Parks will offset losses from the drop in United Parks' long position.| Alaska Air vs. Delta Air Lines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. Frontier Group Holdings |
| United Parks vs. Hyatt Hotels | United Parks vs. Smart Share Global | United Parks vs. Sweetgreen | United Parks vs. Wyndham Hotels Resorts |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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