Correlation Between SkyWest and Frontier Group

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

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

Diversification Opportunities for SkyWest and Frontier Group

0.81

Correlation Coefficient

SkyWest  Frontier Group

Very poor diversification

The 3 months correlation between SkyWest and Frontier is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group 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 Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of SkyWest i.e., SkyWest and Frontier Group go up and down completely randomly.

Pair Corralation between SkyWest and Frontier Group

Given the investment horizon of 90 days SkyWest is expected to generate 0.56 times more return on investment than Frontier Group. However, SkyWest is 1.79 times less risky than Frontier Group. It trades about -0.07 of its potential returns per unit of risk. Frontier Group Holdings is currently generating about -0.11 per unit of risk. If you would invest  10,075  in SkyWest on December 30, 2024 and sell it today you would lose (1,199) from holding SkyWest or give up 11.9% of portfolio value over 90 days.

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

SkyWest  vs.  Frontier Group Holdings

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 weak 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.

Frontier Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontier Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SkyWest and Frontier Group

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

The idea behind SkyWest and Frontier Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.