Correlation Between SkyWest and New Providence
Can any of the company-specific risk be diversified away by investing in both SkyWest and New Providence 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 New Providence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and New Providence Acquisition, you can compare the effects of market volatilities on SkyWest and New Providence 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 New Providence. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and New Providence.
Diversification Opportunities for SkyWest and New Providence
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SkyWest and New is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and New Providence Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Providence Acqui 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 New Providence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Providence Acqui has no effect on the direction of SkyWest i.e., SkyWest and New Providence go up and down completely randomly.
Pair Corralation between SkyWest and New Providence
Given the investment horizon of 90 days SkyWest is expected to generate 5.26 times more return on investment than New Providence. However, SkyWest is 5.26 times more volatile than New Providence Acquisition. It trades about 0.35 of its potential returns per unit of risk. New Providence Acquisition is currently generating about -0.4 per unit of risk. If you would invest 9,482 in SkyWest on August 28, 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 | Very Weak |
| Accuracy | 57.14% |
| Values | Daily Returns |
SkyWest vs. New Providence Acquisition
Performance |
| Timeline |
| SkyWest |
| New Providence Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
SkyWest and New Providence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and New Providence
The main advantage of trading using opposite SkyWest and New Providence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, New Providence 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 New Providence will offset losses from the drop in New Providence's long position.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| New Providence vs. Coursera | New Providence vs. Ihuman Inc | New Providence vs. 51Talk Online Education | New Providence vs. Yuexiu Transport Infrastructure |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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