Correlation Between Alaska Air and CHEVRON

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Can any of the company-specific risk be diversified away by investing in both Alaska Air and CHEVRON 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 CHEVRON 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 CHEVRON USA INC, you can compare the effects of market volatilities on Alaska Air and CHEVRON 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 CHEVRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and CHEVRON.

Diversification Opportunities for Alaska Air and CHEVRON

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alaska and CHEVRON is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and CHEVRON USA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON USA INC 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 CHEVRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON USA INC has no effect on the direction of Alaska Air i.e., Alaska Air and CHEVRON go up and down completely randomly.

Pair Corralation between Alaska Air and CHEVRON

Considering the 90-day investment horizon Alaska Air Group is expected to under-perform the CHEVRON. In addition to that, Alaska Air is 1.67 times more volatile than CHEVRON USA INC. It trades about -0.15 of its total potential returns per unit of risk. CHEVRON USA INC is currently generating about 0.14 per unit of volatility. If you would invest  10,007  in CHEVRON USA INC on December 4, 2024 and sell it today you would earn a total of  505.00  from holding CHEVRON USA INC or generate 5.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alaska Air Group  vs.  CHEVRON USA INC

 Performance 
       Timeline  
Alaska Air Group 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.
CHEVRON USA INC 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON USA INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CHEVRON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Alaska Air and CHEVRON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alaska Air and CHEVRON

The main advantage of trading using opposite Alaska Air and CHEVRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, CHEVRON 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 CHEVRON will offset losses from the drop in CHEVRON's long position.
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The idea behind Alaska Air Group and CHEVRON USA INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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