Correlation Between SkyWest and Air T

Can any of the company-specific risk be diversified away by investing in both SkyWest and Air T 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 Air T into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SkyWest and Air T Inc, you can compare the effects of market volatilities on SkyWest and Air T 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 Air T. Check out your portfolio center. Please also check ongoing floating volatility patterns of SkyWest and Air T.

Diversification Opportunities for SkyWest and Air T

0.43

Correlation Coefficient

SkyWest  Air T

Very weak diversification

The 3 months correlation between SkyWest and Air is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T 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 Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of SkyWest i.e., SkyWest and Air T go up and down completely randomly.

Pair Corralation between SkyWest and Air T

Given the investment horizon of 90 days SkyWest is expected to generate 1.32 times less return on investment than Air T. But when comparing it to its historical volatility, SkyWest is 2.47 times less risky than Air T. It trades about 0.17 of its potential returns per unit of risk. Air T Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,695  in Air T Inc on September 23, 2024 and sell it today you would earn a total of  416.00  from holding Air T Inc or generate 24.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SkyWest  vs.  Air T Inc

SkyWest

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Air T Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Air T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SkyWest and Air T

The main advantage of trading using opposite SkyWest and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind SkyWest and Air T 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.