Correlation Between SkyWest and Airports
Can any of the company-specific risk be diversified away by investing in both SkyWest and Airports 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 SkyWest and Airports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Airports of Thailand, you can compare the effects of market volatilities on SkyWest and Airports 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 SkyWest with a short position of Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Airports.
Diversification Opportunities for SkyWest and Airports
Very poor diversification
The 3 months correlation between SkyWest and Airports is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and SkyWest 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 SkyWest are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of SkyWest i.e., SkyWest and Airports go up and down completely randomly.
Pair Corralation between SkyWest and Airports
Given the investment horizon of 90 days SkyWest is expected to generate 2.6 times more return on investment than Airports. However, SkyWest is 2.6 times more volatile than Airports of Thailand. It trades about 0.35 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.15 per unit of risk. If you would invest 8,428 in SkyWest on August 28, 2024 and sell it today you would earn a total of 2,991 from holding SkyWest or generate 35.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Airports of Thailand
Performance |
| Timeline |
| SkyWest |
| Airports of Thailand |
SkyWest and Airports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Airports
The main advantage of trading using opposite SkyWest and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Airports 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 Airports will offset losses from the drop in Airports' long position.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| Airports vs. Aerofoam Metals | Airports vs. Porvair plc | Airports vs. Tyson Foods | Airports vs. Lion One Metals |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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