Correlation Between SkyWest and Aduro Clean

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

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

Diversification Opportunities for SkyWest and Aduro Clean

0.59

Correlation Coefficient

SkyWest  Aduro Clean

Very weak diversification

The 3 months correlation between SkyWest and Aduro is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Aduro Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aduro Clean Technologies 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 Aduro Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aduro Clean Technologies has no effect on the direction of SkyWest i.e., SkyWest and Aduro Clean go up and down completely randomly.

Pair Corralation between SkyWest and Aduro Clean

Given the investment horizon of 90 days SkyWest is expected to under-perform the Aduro Clean. But the stock apears to be less risky and, when comparing its historical volatility, SkyWest is 1.3 times less risky than Aduro Clean. The stock trades about -0.07 of its potential returns per unit of risk. The Aduro Clean Technologies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  546.00  in Aduro Clean Technologies on December 20, 2024 and sell it today you would lose (18.00) from holding Aduro Clean Technologies or give up 3.3% of portfolio value over 90 days.

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

SkyWest  vs.  Aduro Clean Technologies

SkyWest

Risk-Adjusted Performance

Very Weak

Over the last 90 days SkyWest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Aduro Clean Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aduro Clean Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Aduro Clean is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SkyWest and Aduro Clean

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

The idea behind SkyWest and Aduro Clean Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.