Correlation Between SkyWest and Hawaiian Holdings

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

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

Diversification Opportunities for SkyWest and Hawaiian Holdings

0.58

Correlation Coefficient

SkyWest  Hawaiian Holdings

Very weak diversification

The 3 months correlation between SkyWest and Hawaiian is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings 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 Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of SkyWest i.e., SkyWest and Hawaiian Holdings go up and down completely randomly.

Pair Corralation between SkyWest and Hawaiian Holdings

Given the investment horizon of 90 days SkyWest is expected to generate 3.5 times less return on investment than Hawaiian Holdings. But when comparing it to its historical volatility, SkyWest is 1.72 times less risky than Hawaiian Holdings. It trades about 0.09 of its potential returns per unit of risk. Hawaiian Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,232  in Hawaiian Holdings on September 25, 2024 and sell it today you would earn a total of  568.00  from holding Hawaiian Holdings or generate 46.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	46.03%
Values	Daily Returns

SkyWest  vs.  Hawaiian Holdings

SkyWest

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 13 (%) 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.

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hawaiian Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SkyWest and Hawaiian Holdings

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

The idea behind SkyWest and Hawaiian Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.