Correlation Between United Airlines and SkyWest

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

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

Diversification Opportunities for United Airlines and SkyWest

0.54

Correlation Coefficient

United Airlines  SkyWest

Very weak diversification

The 3 months correlation between United and SkyWest is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and United Airlines 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 United Airlines Holdings are associated (or correlated) with SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of United Airlines i.e., United Airlines and SkyWest go up and down completely randomly.

Pair Corralation between United Airlines and SkyWest

Considering the 90-day investment horizon United Airlines Holdings is expected to generate 1.15 times more return on investment than SkyWest. However, United Airlines is 1.15 times more volatile than SkyWest. It trades about 0.02 of its potential returns per unit of risk. SkyWest is currently generating about -0.09 per unit of risk. If you would invest  9,683  in United Airlines Holdings on November 29, 2024 and sell it today you would earn a total of  57.00  from holding United Airlines Holdings or generate 0.59% return on investment over 90 days.

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

United Airlines Holdings  vs.  SkyWest

United Airlines Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, United Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with United Airlines and SkyWest

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

The idea behind United Airlines Holdings and SkyWest 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.