Correlation Between SkyWest and Aquestive Therapeutics

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

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

Diversification Opportunities for SkyWest and Aquestive Therapeutics

-0.26

Correlation Coefficient

SkyWest  Aquestive Therapeutics

Very good diversification

The 3 months correlation between SkyWest and Aquestive is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics 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 Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of SkyWest i.e., SkyWest and Aquestive Therapeutics go up and down completely randomly.

Pair Corralation between SkyWest and Aquestive Therapeutics

Given the investment horizon of 90 days SkyWest is expected to generate 1.14 times less return on investment than Aquestive Therapeutics. But when comparing it to its historical volatility, SkyWest is 2.13 times less risky than Aquestive Therapeutics. It trades about 0.17 of its potential returns per unit of risk. Aquestive Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  79.00  in Aquestive Therapeutics on September 17, 2024 and sell it today you would earn a total of  282.00  from holding Aquestive Therapeutics or generate 356.96% return on investment over 90 days.

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

SkyWest  vs.  Aquestive Therapeutics

SkyWest

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 19 (%) 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.

Aquestive Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquestive Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SkyWest and Aquestive Therapeutics

The main advantage of trading using opposite SkyWest and Aquestive Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest position performs unexpectedly, Aquestive Therapeutics 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 Aquestive Therapeutics will offset losses from the drop in Aquestive Therapeutics' long position.

The idea behind SkyWest and Aquestive Therapeutics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.