Correlation Between SkyWest and Small Cap
Can any of the company-specific risk be diversified away by investing in both SkyWest and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Small Cap Premium, you can compare the effects of market volatilities on SkyWest and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Small Cap.
Diversification Opportunities for SkyWest and Small Cap
Excellent diversification
The 3 months correlation between SkyWest and Small is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of SkyWest i.e., SkyWest and Small Cap go up and down completely randomly.
Pair Corralation between SkyWest and Small Cap
Given the investment horizon of 90 days SkyWest is expected to generate 5.7 times more return on investment than Small Cap. However, SkyWest is 5.7 times more volatile than Small Cap Premium. It trades about 0.11 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.1 per unit of risk. If you would invest 2,420 in SkyWest on January 9, 2025 and sell it today you would earn a total of 5,521 from holding SkyWest or generate 228.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Small Cap Premium
Performance |
| Timeline |
| SkyWest |
| Small Cap Premium |
SkyWest and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Small Cap
The main advantage of trading using opposite SkyWest and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| Small Cap vs. Aquagold International | Small Cap vs. Morningstar Unconstrained Allocation | Small Cap vs. Thrivent High Yield | Small Cap vs. Via Renewables |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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