Correlation Between Alaska Air and STMicroelectronics

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

Diversification Opportunities for Alaska Air and STMicroelectronics

0.4

Correlation Coefficient

Alaska Air  STMicroelectronics

Very weak diversification

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

Pair Corralation between Alaska Air and STMicroelectronics

Assuming the 90 days trading horizon Alaska Air Group, is expected to under-perform the STMicroelectronics. In addition to that, Alaska Air is 1.56 times more volatile than STMicroelectronics NV. It trades about -0.2 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.25 per unit of volatility. If you would invest  16,390  in STMicroelectronics NV on April 8, 2025 and sell it today you would earn a total of  1,035  from holding STMicroelectronics NV or generate 6.31% 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.  STMicroelectronics NV

Alaska Air Group,

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Alaska Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and STMicroelectronics

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

The idea behind Alaska Air Group, and STMicroelectronics NV 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 Global Correlations module to find global opportunities by holding instruments from different markets.