Correlation Between Alaska Air and Marchex

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

Diversification Opportunities for Alaska Air and Marchex

0.5

Correlation Coefficient

Alaska Air  Marchex

Very weak diversification

The 3 months correlation between Alaska and Marchex is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex 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 Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Alaska Air i.e., Alaska Air and Marchex go up and down completely randomly.

Pair Corralation between Alaska Air and Marchex

Considering the 90-day investment horizon Alaska Air Group is expected to generate 0.68 times more return on investment than Marchex. However, Alaska Air Group is 1.46 times less risky than Marchex. It trades about 0.31 of its potential returns per unit of risk. Marchex is currently generating about 0.17 per unit of risk. If you would invest  5,314  in Alaska Air Group on September 21, 2024 and sell it today you would earn a total of  1,288  from holding Alaska Air Group or generate 24.24% return on investment over 90 days.

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

Alaska Air Group  vs.  Marchex

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.

Marchex

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and Marchex

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

The idea behind Alaska Air Group and Marchex 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.