Correlation Between SkyWest and Regency Centers

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

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

Diversification Opportunities for SkyWest and Regency Centers

-0.18

Correlation Coefficient

SkyWest  Regency Centers

Good diversification

The 3 months correlation between SkyWest and Regency is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Regency Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regency Centers 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 Regency Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regency Centers has no effect on the direction of SkyWest i.e., SkyWest and Regency Centers go up and down completely randomly.

Pair Corralation between SkyWest and Regency Centers

Given the investment horizon of 90 days SkyWest is expected to generate 2.19 times more return on investment than Regency Centers. However, SkyWest is 2.19 times more volatile than Regency Centers. It trades about 0.17 of its potential returns per unit of risk. Regency Centers is currently generating about -0.09 per unit of risk. If you would invest  9,401  in SkyWest on October 25, 2024 and sell it today you would earn a total of  2,205  from holding SkyWest or generate 23.45% return on investment over 90 days.

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

SkyWest  vs.  Regency Centers

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 weak basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Regency Centers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regency Centers has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Regency Centers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SkyWest and Regency Centers

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

The idea behind SkyWest and Regency Centers 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.