Correlation Between Alaska Air and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Dow Jones 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 Dow Jones 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 Dow Jones Hong, you can compare the effects of market volatilities on Alaska Air and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Dow Jones.
Diversification Opportunities for Alaska Air and Dow Jones
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alaska and Dow is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Dow Jones Hong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Hong 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Hong has no effect on the direction of Alaska Air i.e., Alaska Air and Dow Jones go up and down completely randomly.
Pair Corralation between Alaska Air and Dow Jones
Considering the 90-day investment horizon Alaska Air Group is expected to generate 3.27 times more return on investment than Dow Jones. However, Alaska Air is 3.27 times more volatile than Dow Jones Hong. It trades about 0.26 of its potential returns per unit of risk. Dow Jones Hong is currently generating about -0.04 per unit of risk. If you would invest 5,185 in Alaska Air Group on September 12, 2024 and sell it today you would earn a total of 944.00 from holding Alaska Air Group or generate 18.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alaska Air Group vs. Dow Jones Hong
Performance |
| Timeline |
Alaska Air and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Alaska Air Group
Pair trading matchups for Alaska Air
Dow Jones Hong
Pair trading matchups for Dow Jones
Pair Trading with Alaska Air and Dow Jones
The main advantage of trading using opposite Alaska Air and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Summit Environmental | Dow Jones vs. Lincoln Electric Holdings | Dow Jones vs. Steven Madden | Dow Jones vs. Timken Company |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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