Correlation Between SkyWest and Vistra Energy
Can any of the company-specific risk be diversified away by investing in both SkyWest and Vistra Energy 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 Vistra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SkyWest and Vistra Energy Corp, you can compare the effects of market volatilities on SkyWest and Vistra Energy 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 Vistra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Vistra Energy.
Diversification Opportunities for SkyWest and Vistra Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SkyWest and Vistra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Vistra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Energy Corp 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 Vistra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Energy Corp has no effect on the direction of SkyWest i.e., SkyWest and Vistra Energy go up and down completely randomly.
Pair Corralation between SkyWest and Vistra Energy
Given the investment horizon of 90 days SkyWest is expected to generate 2.38 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, SkyWest is 1.72 times less risky than Vistra Energy. It trades about 0.27 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 11,951 in Vistra Energy Corp on September 2, 2024 and sell it today you would earn a total of 4,033 from holding Vistra Energy Corp or generate 33.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SkyWest vs. Vistra Energy Corp
Performance |
| Timeline |
| SkyWest |
| Vistra Energy Corp |
SkyWest and Vistra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SkyWest and Vistra Energy
The main advantage of trading using opposite SkyWest and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Vistra Energy 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 Vistra Energy will offset losses from the drop in Vistra Energy's long position.| SkyWest vs. Copa Holdings SA | SkyWest vs. Sun Country Airlines | SkyWest vs. Air Transport Services | SkyWest vs. Frontier Group Holdings |
| Vistra Energy vs. Pampa Energia SA | Vistra Energy vs. TransAlta Corp | Vistra Energy vs. Power Assets 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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