Correlation Between Alaska Air and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Smith Douglas 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 Smith Douglas 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 Smith Douglas Homes, you can compare the effects of market volatilities on Alaska Air and Smith Douglas 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 Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Smith Douglas.
Diversification Opportunities for Alaska Air and Smith Douglas
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alaska and Smith is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Alaska Air i.e., Alaska Air and Smith Douglas go up and down completely randomly.
Pair Corralation between Alaska Air and Smith Douglas
Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.6 times more return on investment than Smith Douglas. However, Alaska Air Group is 1.66 times less risky than Smith Douglas. It trades about 0.22 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about 0.04 per unit of risk. If you would invest 4,791 in Alaska Air Group on September 1, 2024 and sell it today you would earn a total of 469.00 from holding Alaska Air Group or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Smith Douglas Homes
Performance |
| Timeline |
| Alaska Air Group |
| Smith Douglas Homes |
Alaska Air and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Smith Douglas
The main advantage of trading using opposite Alaska Air and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' long position.| Alaska Air vs. Canadian Pacific Railway | Alaska Air vs. Volaris | Alaska Air vs. Werner Enterprises | Alaska Air vs. flyExclusive, |
| Smith Douglas vs. Arhaus Inc | Smith Douglas vs. Floor Decor Holdings | Smith Douglas vs. Haverty Furniture Companies | Smith Douglas vs. Kingfisher plc |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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