Correlation Between Air Transport and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and Alaska Air Group, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Alaska Air.
Diversification Opportunities for Air Transport and Alaska Air
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Alaska is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Alaska Air go up and down completely randomly.
Pair Corralation between Air Transport and Alaska Air
Given the investment horizon of 90 days Air Transport Services is expected to generate 2.7 times more return on investment than Alaska Air. However, Air Transport is 2.7 times more volatile than Alaska Air Group. It trades about 0.23 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.29 per unit of risk. If you would invest 1,720 in Air Transport Services on August 28, 2024 and sell it today you would earn a total of 475.00 from holding Air Transport Services or generate 27.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Alaska Air Group
Performance |
| Timeline |
| Air Transport Services |
| Alaska Air Group |
Air Transport and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Alaska Air
The main advantage of trading using opposite Air Transport and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| Alaska Air vs. Delta Air Lines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. American Airlines Group | Alaska Air vs. JetBlue Airways Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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