Correlation Between Apple and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Alaska Air Group, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Alaska Air.
Diversification Opportunities for Apple and Alaska Air
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Alaska is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Alaska Air go up and down completely randomly.
Pair Corralation between Apple and Alaska Air
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.66 times more return on investment than Alaska Air. However, Apple Inc is 1.51 times less risky than Alaska Air. It trades about 0.07 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.02 per unit of risk. If you would invest 13,844 in Apple Inc on August 24, 2024 and sell it today you would earn a total of 8,201 from holding Apple Inc or generate 59.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Alaska Air Group
Performance |
| Timeline |
| Apple Inc |
| Alaska Air Group |
Apple and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Alaska Air
The main advantage of trading using opposite Apple and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Fukuyama Transporting Co | Apple vs. CODERE ONLINE LUX | Apple vs. MUTUIONLINE | Apple vs. SALESFORCE INC CDR |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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