Correlation Between SkyWest and Horizon Space

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

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

Diversification Opportunities for SkyWest and Horizon Space

0.08

Correlation Coefficient

SkyWest  Horizon Space

Significant diversification

The 3 months correlation between SkyWest and Horizon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Horizon Space Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Space Acquisition 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 Horizon Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Space Acquisition has no effect on the direction of SkyWest i.e., SkyWest and Horizon Space go up and down completely randomly.

Pair Corralation between SkyWest and Horizon Space

Given the investment horizon of 90 days SkyWest is expected to under-perform the Horizon Space. But the stock apears to be less risky and, when comparing its historical volatility, SkyWest is 12.06 times less risky than Horizon Space. The stock trades about -0.05 of its potential returns per unit of risk. The Horizon Space Acquisition is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Horizon Space Acquisition on December 29, 2024 and sell it today you would earn a total of  0.30  from holding Horizon Space Acquisition or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

SkyWest  vs.  Horizon Space Acquisition

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 uncertain 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.

Horizon Space Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Space Acquisition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Horizon Space showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SkyWest and Horizon Space

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

The idea behind SkyWest and Horizon Space 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.