Correlation Between Hanover Foods and SkyWest

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

By analyzing existing cross correlation between Hanover Foods and SkyWest, you can compare the effects of market volatilities on Hanover Foods and SkyWest 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 Hanover Foods with a short position of SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanover Foods and SkyWest.

Diversification Opportunities for Hanover Foods and SkyWest

0.03

Correlation Coefficient

Hanover Foods  SkyWest

Significant diversification

The 3 months correlation between Hanover and SkyWest is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hanover Foods and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Hanover Foods 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 Hanover Foods are associated (or correlated) with SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of Hanover Foods i.e., Hanover Foods and SkyWest go up and down completely randomly.

Pair Corralation between Hanover Foods and SkyWest

Assuming the 90 days horizon Hanover Foods is expected to generate 0.85 times more return on investment than SkyWest. However, Hanover Foods is 1.18 times less risky than SkyWest. It trades about -0.22 of its potential returns per unit of risk. SkyWest is currently generating about -0.21 per unit of risk. If you would invest  6,300  in Hanover Foods on October 5, 2024 and sell it today you would lose (456.00) from holding Hanover Foods or give up 7.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Hanover Foods  vs.  SkyWest

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SkyWest

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 12 (%) 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.

Pair Trading with Hanover Foods and SkyWest

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

The idea behind Hanover Foods and SkyWest 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.