Correlation Between SkyWest and Leef Brands

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

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

Diversification Opportunities for SkyWest and Leef Brands

0.21

Correlation Coefficient

SkyWest  Leef Brands

Modest diversification

The 3 months correlation between SkyWest and Leef is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of SkyWest i.e., SkyWest and Leef Brands go up and down completely randomly.

Pair Corralation between SkyWest and Leef Brands

Given the investment horizon of 90 days SkyWest is expected to under-perform the Leef Brands. But the stock apears to be less risky and, when comparing its historical volatility, SkyWest is 5.44 times less risky than Leef Brands. The stock trades about -0.16 of its potential returns per unit of risk. The Leef Brands is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Leef Brands on September 19, 2024 and sell it today you would earn a total of  4.00  from holding Leef Brands or generate 28.57% return on investment over 90 days.

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

SkyWest  vs.  Leef Brands

SkyWest

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 15 (%) 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.

Leef Brands

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leef Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Leef Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SkyWest and Leef Brands

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

The idea behind SkyWest and Leef Brands 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.