Correlation Between Alaska Air and CITIC

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

Diversification Opportunities for Alaska Air and CITIC

0.2

Correlation Coefficient

Alaska Air  CITIC

Modest diversification

The 3 months correlation between Alaska and CITIC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Alaska Air i.e., Alaska Air and CITIC go up and down completely randomly.

Pair Corralation between Alaska Air and CITIC

Assuming the 90 days trading horizon Alaska Air is expected to generate 1.24 times less return on investment than CITIC. In addition to that, Alaska Air is 1.91 times more volatile than CITIC Limited. It trades about 0.09 of its total potential returns per unit of risk. CITIC Limited is currently generating about 0.22 per unit of volatility. If you would invest  97.00  in CITIC Limited on April 22, 2025 and sell it today you would earn a total of  23.00  from holding CITIC Limited or generate 23.71% return on investment over 90 days.

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

Alaska Air Group  vs.  CITIC Limited

Alaska Air Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Alaska Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

CITIC Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and CITIC

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

The idea behind Alaska Air Group and CITIC Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.