Correlation Between Delta Air and SkyWest
Can any of the company-specific risk be diversified away by investing in both Delta Air 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 Delta Air and SkyWest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delta Air Lines and SkyWest, you can compare the effects of market volatilities on Delta Air 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 Delta Air with a short position of SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and SkyWest.
Diversification Opportunities for Delta Air and SkyWest
Very poor diversification
The 3 months correlation between Delta and SkyWest is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Delta 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 Delta Air Lines 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 Delta Air i.e., Delta Air and SkyWest go up and down completely randomly.
Pair Corralation between Delta Air and SkyWest
Considering the 90-day investment horizon Delta Air is expected to generate 1.18 times less return on investment than SkyWest. In addition to that, Delta Air is 1.23 times more volatile than SkyWest. It trades about 0.27 of its total potential returns per unit of risk. SkyWest is currently generating about 0.39 per unit of volatility. If you would invest 10,013 in SkyWest on November 1, 2024 and sell it today you would earn a total of 1,570 from holding SkyWest or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Delta Air Lines vs. SkyWest
Performance |
| Timeline |
| Delta Air Lines |
| SkyWest |
Delta Air and SkyWest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and SkyWest
The main advantage of trading using opposite Delta Air and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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.| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. United Airlines 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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