Correlation Between Alaska Air and Somnigroup International

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

Diversification Opportunities for Alaska Air and Somnigroup International

0.7

Correlation Coefficient

Alaska Air  Somnigroup International

Poor diversification

The 3 months correlation between Alaska and Somnigroup is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Somnigroup International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somnigroup International 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 Somnigroup International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somnigroup International has no effect on the direction of Alaska Air i.e., Alaska Air and Somnigroup International go up and down completely randomly.

Pair Corralation between Alaska Air and Somnigroup International

Considering the 90-day investment horizon Alaska Air Group is expected to generate 2.21 times more return on investment than Somnigroup International. However, Alaska Air is 2.21 times more volatile than Somnigroup International. It trades about 0.06 of its potential returns per unit of risk. Somnigroup International is currently generating about 0.02 per unit of risk. If you would invest  5,027  in Alaska Air Group on February 8, 2025 and sell it today you would earn a total of  176.00  from holding Alaska Air Group or generate 3.5% return on investment over 90 days.

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

Alaska Air Group  vs.  Somnigroup International

Alaska Air Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alaska Air Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Somnigroup International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Somnigroup International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Somnigroup International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alaska Air and Somnigroup International

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

The idea behind Alaska Air Group and Somnigroup International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..