Correlation Between SkyWest and First Watch
Can any of the company-specific risk be diversified away by investing in both SkyWest and First Watch 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 First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and First Watch Restaurant, you can compare the effects of market volatilities on SkyWest and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and First Watch.
Diversification Opportunities for SkyWest and First Watch
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SkyWest and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of SkyWest i.e., SkyWest and First Watch go up and down completely randomly.
Pair Corralation between SkyWest and First Watch
Given the investment horizon of 90 days SkyWest is expected to generate 1.07 times more return on investment than First Watch. However, SkyWest is 1.07 times more volatile than First Watch Restaurant. It trades about 0.15 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.03 per unit of risk. If you would invest 1,847 in SkyWest on September 3, 2024 and sell it today you would earn a total of 9,627 from holding SkyWest or generate 521.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. First Watch Restaurant
Performance |
| Timeline |
| SkyWest |
| First Watch Restaurant |
SkyWest and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and First Watch
The main advantage of trading using opposite SkyWest and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch's long position.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| First Watch vs. Highway Holdings Limited | First Watch vs. QCR Holdings | First Watch vs. Partner Communications | First Watch vs. Acumen Pharmaceuticals |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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