Correlation Between Alaska Air and GE Vernova

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

Diversification Opportunities for Alaska Air and GE Vernova

0.87

Correlation Coefficient

Alaska Air  GE Vernova

Very poor diversification

The 3 months correlation between Alaska and GEV is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Alaska Air i.e., Alaska Air and GE Vernova go up and down completely randomly.

Pair Corralation between Alaska Air and GE Vernova

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.97 times more return on investment than GE Vernova. However, Alaska Air Group is 1.03 times less risky than GE Vernova. It trades about 0.3 of its potential returns per unit of risk. GE Vernova LLC is currently generating about 0.23 per unit of risk. If you would invest  3,976  in Alaska Air Group on September 18, 2024 and sell it today you would earn a total of  2,364  from holding Alaska Air Group or generate 59.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alaska Air Group  vs.  GE Vernova LLC

Alaska Air Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

GE Vernova LLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and GE Vernova

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

The idea behind Alaska Air Group and GE Vernova LLC 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.

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