Correlation Between Advanced Medical and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Advanced Medical and Alaska Air 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 Advanced Medical and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Medical Solutions and Alaska Air Group, you can compare the effects of market volatilities on Advanced Medical and Alaska Air 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 Advanced Medical with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Medical and Alaska Air.
Diversification Opportunities for Advanced Medical and Alaska Air
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advanced and Alaska is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group and Advanced Medical 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 Advanced Medical Solutions are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Advanced Medical i.e., Advanced Medical and Alaska Air go up and down completely randomly.
Pair Corralation between Advanced Medical and Alaska Air
Assuming the 90 days trading horizon Advanced Medical is expected to generate 9.54 times less return on investment than Alaska Air. In addition to that, Advanced Medical is 1.11 times more volatile than Alaska Air Group. It trades about 0.01 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.06 per unit of volatility. If you would invest 4,331 in Alaska Air Group on November 27, 2024 and sell it today you would earn a total of 2,910 from holding Alaska Air Group or generate 67.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.75% |
| Values | Daily Returns |
Advanced Medical Solutions vs. Alaska Air Group
Performance |
| Timeline |
| Advanced Medical Sol |
| Alaska Air Group |
Advanced Medical and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Medical and Alaska Air
The main advantage of trading using opposite Advanced Medical and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.| Advanced Medical vs. International Biotechnology Trust | Advanced Medical vs. Ashtead Technology Holdings | Advanced Medical vs. Clean Power Hydrogen | Advanced Medical vs. Ross Stores |
| Alaska Air vs. Empire Metals Limited | Alaska Air vs. Jade Road Investments | Alaska Air vs. URU Metals | Alaska Air vs. Smithson Investment Trust |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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