Correlation Between Verizon Communications and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Alaska Air Group, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Alaska Air.
Diversification Opportunities for Verizon Communications and Alaska Air
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verizon and Alaska is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Alaska Air go up and down completely randomly.
Pair Corralation between Verizon Communications and Alaska Air
Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.48 times less risky than Alaska Air. The stock trades about -0.03 of its potential returns per unit of risk. The Alaska Air Group is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 3,968 in Alaska Air Group on January 24, 2024 and sell it today you would earn a total of 585.00 from holding Alaska Air Group or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Alaska Air Group
Performance |
| Timeline |
| Verizon Communications |
| Alaska Air Group |
Verizon Communications and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Alaska Air
The main advantage of trading using opposite Verizon Communications and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Comcast Corp | Verizon Communications vs. Charter Communications | Verizon Communications vs. Vodafone Group PLC |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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