Correlation Between Air Transport and SkyWest
Can any of the company-specific risk be diversified away by investing in both Air Transport and SkyWest 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 Air Transport and SkyWest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and SkyWest, you can compare the effects of market volatilities on Air Transport and SkyWest 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 Air Transport with a short position of SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and SkyWest.
Diversification Opportunities for Air Transport and SkyWest
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and SkyWest is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Air Transport 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 Air Transport Services are associated (or correlated) with SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of Air Transport i.e., Air Transport and SkyWest go up and down completely randomly.
Pair Corralation between Air Transport and SkyWest
Given the investment horizon of 90 days Air Transport is expected to generate 37.13 times less return on investment than SkyWest. In addition to that, Air Transport is 1.25 times more volatile than SkyWest. It trades about 0.0 of its total potential returns per unit of risk. SkyWest is currently generating about 0.15 per unit of volatility. If you would invest 1,848 in SkyWest on August 27, 2024 and sell it today you would earn a total of 9,342 from holding SkyWest or generate 505.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. SkyWest
Performance |
| Timeline |
| Air Transport Services |
| SkyWest |
Air Transport and SkyWest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and SkyWest
The main advantage of trading using opposite Air Transport and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, SkyWest 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 SkyWest will offset losses from the drop in SkyWest's long position.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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