Correlation Between SkyWest and Aurora Technology

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

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

Diversification Opportunities for SkyWest and Aurora Technology

0.62

Correlation Coefficient

SkyWest  Aurora Technology

Poor diversification

The 3 months correlation between SkyWest and Aurora is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Aurora Technology Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Technology 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 Aurora Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Technology has no effect on the direction of SkyWest i.e., SkyWest and Aurora Technology go up and down completely randomly.

Pair Corralation between SkyWest and Aurora Technology

Given the investment horizon of 90 days SkyWest is expected to generate 13.9 times more return on investment than Aurora Technology. However, SkyWest is 13.9 times more volatile than Aurora Technology Acquisition. It trades about 0.17 of its potential returns per unit of risk. Aurora Technology Acquisition is currently generating about 0.13 per unit of risk. If you would invest  1,529  in SkyWest on September 14, 2024 and sell it today you would earn a total of  9,106  from holding SkyWest or generate 595.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.89%
Values	Daily Returns

SkyWest  vs.  Aurora Technology Acquisition

SkyWest

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Aurora Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Technology Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Aurora Technology is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SkyWest and Aurora Technology

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

The idea behind SkyWest and Aurora Technology Acquisition 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.