Correlation Between SkyWest and Bank of America

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

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

Diversification Opportunities for SkyWest and Bank of America

0.0

Correlation Coefficient

SkyWest  Bank of America

Pay attention - limited upside

The 3 months correlation between SkyWest and Bank is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of SkyWest i.e., SkyWest and Bank of America go up and down completely randomly.

Pair Corralation between SkyWest and Bank of America

Given the investment horizon of 90 days SkyWest is expected to generate 3.57 times more return on investment than Bank of America. However, SkyWest is 3.57 times more volatile than Bank of America. It trades about 0.15 of its potential returns per unit of risk. Bank of America is currently generating about 0.07 per unit of risk. If you would invest  4,972  in SkyWest on October 8, 2024 and sell it today you would earn a total of  5,401  from holding SkyWest or generate 108.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

SkyWest  vs.  Bank of America

SkyWest

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 11 (%) 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.

Bank of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SkyWest and Bank of America

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

The idea behind SkyWest and Bank of America 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.