Correlation Between STMicroelectronics and Alaska Air

Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Alaska Air 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 STMicroelectronics and Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STMicroelectronics NV and Alaska Air Group,, you can compare the effects of market volatilities on STMicroelectronics and Alaska Air 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 STMicroelectronics with a short position of Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Alaska Air.

Diversification Opportunities for STMicroelectronics and Alaska Air

0.3

Correlation Coefficient

STMicroelectronics  Alaska Air

Weak diversification

The 3 months correlation between STMicroelectronics and Alaska is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Alaska Air Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group, and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group, has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Alaska Air go up and down completely randomly.

Pair Corralation between STMicroelectronics and Alaska Air

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 1.13 times more return on investment than Alaska Air. However, STMicroelectronics is 1.13 times more volatile than Alaska Air Group,. It trades about 0.26 of its potential returns per unit of risk. Alaska Air Group, is currently generating about 0.03 per unit of risk. If you would invest  11,855  in STMicroelectronics NV on April 13, 2025 and sell it today you would earn a total of  5,984  from holding STMicroelectronics NV or generate 50.48% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Alaska Air Group,

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with STMicroelectronics and Alaska Air

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

The idea behind STMicroelectronics NV and Alaska Air Group, 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.