Correlation Between Alaska Air and Tatton Asset

Can any of the company-specific risk be diversified away by investing in both Alaska Air and Tatton Asset 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 Tatton Asset 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 Tatton Asset Management, you can compare the effects of market volatilities on Alaska Air and Tatton Asset 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 Tatton Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Tatton Asset.

Diversification Opportunities for Alaska Air and Tatton Asset

0.4

Correlation Coefficient

Alaska Air  Tatton Asset

Very weak diversification

The 3 months correlation between Alaska and Tatton is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management 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 Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of Alaska Air i.e., Alaska Air and Tatton Asset go up and down completely randomly.

Pair Corralation between Alaska Air and Tatton Asset

Assuming the 90 days trading horizon Alaska Air is expected to generate 1.02 times less return on investment than Tatton Asset. In addition to that, Alaska Air is 1.23 times more volatile than Tatton Asset Management. It trades about 0.05 of its total potential returns per unit of risk. Tatton Asset Management is currently generating about 0.06 per unit of volatility. If you would invest  42,272  in Tatton Asset Management on September 22, 2024 and sell it today you would earn a total of  26,728  from holding Tatton Asset Management or generate 63.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Alaska Air Group  vs.  Tatton Asset Management

Alaska Air Group

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tatton Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tatton Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Tatton Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alaska Air and Tatton Asset

The main advantage of trading using opposite Alaska Air and Tatton Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Tatton Asset 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 Tatton Asset will offset losses from the drop in Tatton Asset's long position.

The idea behind Alaska Air Group and Tatton Asset Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.