Correlation Between Alaska Air and Werner Enterprises
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises, you can compare the effects of market volatilities on Alaska Air and Werner Enterprises 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 Werner Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Werner Enterprises.
Diversification Opportunities for Alaska Air and Werner Enterprises
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alaska and Werner is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises 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 Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of Alaska Air i.e., Alaska Air and Werner Enterprises go up and down completely randomly.
Pair Corralation between Alaska Air and Werner Enterprises
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.39 times more return on investment than Werner Enterprises. However, Alaska Air is 1.39 times more volatile than Werner Enterprises. It trades about 0.07 of its potential returns per unit of risk. Werner Enterprises is currently generating about 0.01 per unit of risk. If you would invest 3,754 in Alaska Air Group on August 25, 2024 and sell it today you would earn a total of 1,488 from holding Alaska Air Group or generate 39.64% 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. Werner Enterprises
Performance |
| Timeline |
| Alaska Air Group |
| Werner Enterprises |
Alaska Air and Werner Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Werner Enterprises
The main advantage of trading using opposite Alaska Air and Werner Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Werner Enterprises 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 Werner Enterprises will offset losses from the drop in Werner Enterprises' long position.The idea behind Alaska Air Group and Werner Enterprises 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.| Werner Enterprises vs. Heartland Express | Werner Enterprises vs. Universal Logistics Holdings | Werner Enterprises vs. Schneider National | Werner Enterprises vs. Marten Transport |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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