Correlation Between American Airlines and Alaska Air
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Alaska Air Group, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Alaska Air.
Diversification Opportunities for American Airlines and Alaska Air
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Alaska is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group 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 American Airlines 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 American Airlines Group 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 American Airlines i.e., American Airlines and Alaska Air go up and down completely randomly.
Pair Corralation between American Airlines and Alaska Air
Considering the 90-day investment horizon American Airlines is expected to generate 1.07 times less return on investment than Alaska Air. In addition to that, American Airlines is 1.18 times more volatile than Alaska Air Group. It trades about 0.02 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.02 per unit of volatility. If you would invest 4,078 in Alaska Air Group on January 19, 2024 and sell it today you would earn a total of 463.00 from holding Alaska Air Group or generate 11.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Alaska Air Group
Performance |
| Timeline |
| American Airlines |
| Alaska Air Group |
American Airlines and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Alaska Air
The main advantage of trading using opposite American Airlines and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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.| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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