Correlation Between Cars and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Alaska Air Group, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Alaska Air.
Diversification Opportunities for Cars and Alaska Air
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cars and Alaska is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cars 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 Cars 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 Cars 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 Cars i.e., Cars and Alaska Air go up and down completely randomly.
Pair Corralation between Cars and Alaska Air
Assuming the 90 days horizon Cars Inc is expected to generate 1.25 times more return on investment than Alaska Air. However, Cars is 1.25 times more volatile than Alaska Air Group. It trades about 0.27 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.28 per unit of risk. If you would invest 1,490 in Cars Inc on August 28, 2024 and sell it today you would earn a total of 260.00 from holding Cars Inc or generate 17.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Alaska Air Group
Performance |
| Timeline |
| Cars Inc |
| Alaska Air Group |
Cars and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Alaska Air
The main advantage of trading using opposite Cars and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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.| Cars vs. Superior Plus Corp | Cars vs. NMI Holdings | Cars vs. Origin Agritech | Cars vs. SIVERS SEMICONDUCTORS AB |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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