Correlation Between SkyWest and AirAsia Group

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

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

Diversification Opportunities for SkyWest and AirAsia Group

0.51

Correlation Coefficient

SkyWest  AirAsia Group

Very weak diversification

The 3 months correlation between SkyWest and AirAsia is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and AirAsia Group Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirAsia Group Berhad 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 AirAsia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirAsia Group Berhad has no effect on the direction of SkyWest i.e., SkyWest and AirAsia Group go up and down completely randomly.

Pair Corralation between SkyWest and AirAsia Group

Given the investment horizon of 90 days SkyWest is expected to under-perform the AirAsia Group. But the stock apears to be less risky and, when comparing its historical volatility, SkyWest is 4.75 times less risky than AirAsia Group. The stock trades about -0.07 of its potential returns per unit of risk. The AirAsia Group Berhad is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in AirAsia Group Berhad on December 30, 2024 and sell it today you would lose (5.00) from holding AirAsia Group Berhad or give up 25.0% of portfolio value over 90 days.

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

SkyWest  vs.  AirAsia Group Berhad

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.

AirAsia Group Berhad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AirAsia Group Berhad are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, AirAsia Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SkyWest and AirAsia Group

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

The idea behind SkyWest and AirAsia Group Berhad 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.