Correlation Between SkyWest and CHEVRON

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Can any of the company-specific risk be diversified away by investing in both SkyWest and CHEVRON 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 CHEVRON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and CHEVRON USA INC, you can compare the effects of market volatilities on SkyWest and CHEVRON 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 CHEVRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and CHEVRON.

Diversification Opportunities for SkyWest and CHEVRON

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between SkyWest and CHEVRON is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and CHEVRON USA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON USA INC 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 CHEVRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON USA INC has no effect on the direction of SkyWest i.e., SkyWest and CHEVRON go up and down completely randomly.

Pair Corralation between SkyWest and CHEVRON

Given the investment horizon of 90 days SkyWest is expected to generate 1.63 times more return on investment than CHEVRON. However, SkyWest is 1.63 times more volatile than CHEVRON USA INC. It trades about 0.19 of its potential returns per unit of risk. CHEVRON USA INC is currently generating about 0.03 per unit of risk. If you would invest  10,238  in SkyWest on October 20, 2024 and sell it today you would earn a total of  691.00  from holding SkyWest or generate 6.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

SkyWest  vs.  CHEVRON USA INC

 Performance 
       Timeline  
SkyWest 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.
CHEVRON USA INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CHEVRON USA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CHEVRON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SkyWest and CHEVRON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SkyWest and CHEVRON

The main advantage of trading using opposite SkyWest and CHEVRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, CHEVRON 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 CHEVRON will offset losses from the drop in CHEVRON's long position.
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The idea behind SkyWest and CHEVRON USA INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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