Correlation Between SkyWest and SkyCity Entertainment

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

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

Diversification Opportunities for SkyWest and SkyCity Entertainment

-0.01

Correlation Coefficient

SkyWest  SkyCity Entertainment

Good diversification

The 3 months correlation between SkyWest and SkyCity is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and SkyCity Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyCity Entertainment 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 SkyCity Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyCity Entertainment has no effect on the direction of SkyWest i.e., SkyWest and SkyCity Entertainment go up and down completely randomly.

Pair Corralation between SkyWest and SkyCity Entertainment

Given the investment horizon of 90 days SkyWest is expected to generate 1.17 times more return on investment than SkyCity Entertainment. However, SkyWest is 1.17 times more volatile than SkyCity Entertainment Group. It trades about -0.05 of its potential returns per unit of risk. SkyCity Entertainment Group is currently generating about -0.13 per unit of risk. If you would invest  10,075  in SkyWest on December 29, 2024 and sell it today you would lose (1,010) from holding SkyWest or give up 10.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

SkyWest  vs.  SkyCity Entertainment Group

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 abnormal 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.

SkyCity Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days SkyCity Entertainment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SkyWest and SkyCity Entertainment

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

The idea behind SkyWest and SkyCity Entertainment Group 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.