Correlation Between SkyWest and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both SkyWest and Century Aluminum 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 Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Century Aluminum, you can compare the effects of market volatilities on SkyWest and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Century Aluminum.
Diversification Opportunities for SkyWest and Century Aluminum
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SkyWest and Century is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of SkyWest i.e., SkyWest and Century Aluminum go up and down completely randomly.
Pair Corralation between SkyWest and Century Aluminum
Given the investment horizon of 90 days SkyWest is expected to generate 0.53 times more return on investment than Century Aluminum. However, SkyWest is 1.89 times less risky than Century Aluminum. It trades about 0.09 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.04 per unit of risk. If you would invest 7,944 in SkyWest on September 19, 2024 and sell it today you would earn a total of 1,996 from holding SkyWest or generate 25.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Century Aluminum
Performance |
| Timeline |
| SkyWest |
| Century Aluminum |
SkyWest and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Century Aluminum
The main advantage of trading using opposite SkyWest and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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