Correlation Between SkyWest and OFX Group

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

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

Diversification Opportunities for SkyWest and OFX Group

0.53

Correlation Coefficient

SkyWest  OFX Group

Very weak diversification

The 3 months correlation between SkyWest and OFX is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and OFX Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFX Group 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 OFX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFX Group has no effect on the direction of SkyWest i.e., SkyWest and OFX Group go up and down completely randomly.

Pair Corralation between SkyWest and OFX Group

Given the investment horizon of 90 days SkyWest is expected to generate 0.55 times more return on investment than OFX Group. However, SkyWest is 1.83 times less risky than OFX Group. It trades about 0.13 of its potential returns per unit of risk. OFX Group Ltd is currently generating about 0.02 per unit of risk. If you would invest  4,151  in SkyWest on September 12, 2024 and sell it today you would earn a total of  6,542  from holding SkyWest or generate 157.6% return on investment over 90 days.

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

SkyWest  vs.  OFX Group Ltd

SkyWest

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

OFX Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OFX Group Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, OFX Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SkyWest and OFX Group

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

The idea behind SkyWest and OFX Group Ltd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.