Correlation Between SkyWest and Eagle Point

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

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

Diversification Opportunities for SkyWest and Eagle Point

-0.36

Correlation Coefficient

SkyWest  Eagle Point

Very good diversification

The 3 months correlation between SkyWest and Eagle is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit 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 Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Credit has no effect on the direction of SkyWest i.e., SkyWest and Eagle Point go up and down completely randomly.

Pair Corralation between SkyWest and Eagle Point

Given the investment horizon of 90 days SkyWest is expected to generate 4.36 times more return on investment than Eagle Point. However, SkyWest is 4.36 times more volatile than Eagle Point Credit. It trades about 0.28 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.08 per unit of risk. If you would invest  7,826  in SkyWest on September 13, 2024 and sell it today you would earn a total of  3,125  from holding SkyWest or generate 39.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

SkyWest  vs.  Eagle Point Credit

SkyWest

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Eagle Point Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Point Credit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SkyWest and Eagle Point

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

The idea behind SkyWest and Eagle Point Credit 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.