Correlation Between SkyWest and Stepan
Can any of the company-specific risk be diversified away by investing in both SkyWest and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Stepan Company, you can compare the effects of market volatilities on SkyWest and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Stepan.
Diversification Opportunities for SkyWest and Stepan
Significant diversification
The 3 months correlation between SkyWest and Stepan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of SkyWest i.e., SkyWest and Stepan go up and down completely randomly.
Pair Corralation between SkyWest and Stepan
Given the investment horizon of 90 days SkyWest is expected to generate 1.1 times more return on investment than Stepan. However, SkyWest is 1.1 times more volatile than Stepan Company. It trades about 0.39 of its potential returns per unit of risk. Stepan Company is currently generating about 0.01 per unit of risk. If you would invest 10,373 in SkyWest on November 4, 2024 and sell it today you would earn a total of 1,719 from holding SkyWest or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Stepan Company
Performance |
| Timeline |
| SkyWest |
| Stepan Company |
SkyWest and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Stepan
The main advantage of trading using opposite SkyWest and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan'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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |