Correlation Between Alaska Air and American Airlines
Can any of the company-specific risk be diversified away by investing in both Alaska Air and American Airlines 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 Alaska Air and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and American Airlines Group, you can compare the effects of market volatilities on Alaska Air and American Airlines 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 Alaska Air with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and American Airlines.
Diversification Opportunities for Alaska Air and American Airlines
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alaska and American is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Alaska Air 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 Alaska Air Group are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Alaska Air i.e., Alaska Air and American Airlines go up and down completely randomly.
Pair Corralation between Alaska Air and American Airlines
Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.94 times more return on investment than American Airlines. However, Alaska Air Group is 1.06 times less risky than American Airlines. It trades about 0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.05 per unit of risk. If you would invest 3,684 in Alaska Air Group on January 24, 2024 and sell it today you would earn a total of 869.00 from holding Alaska Air Group or generate 23.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. American Airlines Group
Performance |
| Timeline |
| Alaska Air Group |
| American Airlines |
Alaska Air and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and American Airlines
The main advantage of trading using opposite Alaska Air and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Alaska Air vs. Delta Air Lines | Alaska Air vs. United Airlines Holdings | Alaska Air vs. American Airlines Group | Alaska Air vs. JetBlue Airways Corp |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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