Correlation Between Alaska Air and 26875PAU5

Can any of the company-specific risk be diversified away by investing in both Alaska Air and 26875PAU5 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 26875PAU5 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 EOG RESOURCES INC, you can compare the effects of market volatilities on Alaska Air and 26875PAU5 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 26875PAU5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and 26875PAU5.

Diversification Opportunities for Alaska Air and 26875PAU5

-0.72

Correlation Coefficient

Alaska Air  26875PAU5

Pay attention - limited upside

The 3 months correlation between Alaska and 26875PAU5 is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and EOG RESOURCES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG RESOURCES INC 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 26875PAU5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG RESOURCES INC has no effect on the direction of Alaska Air i.e., Alaska Air and 26875PAU5 go up and down completely randomly.

Pair Corralation between Alaska Air and 26875PAU5

Considering the 90-day investment horizon Alaska Air Group is expected to generate 5.6 times more return on investment than 26875PAU5. However, Alaska Air is 5.6 times more volatile than EOG RESOURCES INC. It trades about 0.25 of its potential returns per unit of risk. EOG RESOURCES INC is currently generating about -0.1 per unit of risk. If you would invest  4,511  in Alaska Air Group on October 1, 2024 and sell it today you would earn a total of  2,072  from holding Alaska Air Group or generate 45.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Alaska Air Group  vs.  EOG RESOURCES INC

Alaska Air Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 19 (%) 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.

EOG RESOURCES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EOG RESOURCES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26875PAU5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alaska Air and 26875PAU5

The main advantage of trading using opposite Alaska Air and 26875PAU5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, 26875PAU5 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 26875PAU5 will offset losses from the drop in 26875PAU5's long position.

The idea behind Alaska Air Group and EOG RESOURCES INC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.