Correlation Between International Consolidated and SkyWest
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and SkyWest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and SkyWest, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and SkyWest.
Diversification Opportunities for International Consolidated and SkyWest
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and SkyWest is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and SkyWest go up and down completely randomly.
Pair Corralation between International Consolidated and SkyWest
Assuming the 90 days horizon International Consolidated is expected to generate 1.55 times less return on investment than SkyWest. In addition to that, International Consolidated is 2.37 times more volatile than SkyWest. It trades about 0.1 of its total potential returns per unit of risk. SkyWest is currently generating about 0.35 per unit of volatility. If you would invest 9,482 in SkyWest on August 27, 2024 and sell it today you would earn a total of 1,937 from holding SkyWest or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. SkyWest
Performance |
| Timeline |
| International Consolidated |
| SkyWest |
International Consolidated and SkyWest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and SkyWest
The main advantage of trading using opposite International Consolidated and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Air China Limited | International Consolidated vs. China Southern Airlines |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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