Correlation Between Frontier Group and SkyWest

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

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

Diversification Opportunities for Frontier Group and SkyWest

0.74

Correlation Coefficient

Frontier Group  SkyWest

Poor diversification

The 3 months correlation between Frontier and SkyWest is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Frontier Group 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 Frontier Group 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 Frontier Group i.e., Frontier Group and SkyWest go up and down completely randomly.

Pair Corralation between Frontier Group and SkyWest

Given the investment horizon of 90 days Frontier Group Holdings is expected to generate 2.75 times more return on investment than SkyWest. However, Frontier Group is 2.75 times more volatile than SkyWest. It trades about 0.17 of its potential returns per unit of risk. SkyWest is currently generating about 0.36 per unit of risk. If you would invest  356.00  in Frontier Group Holdings on August 31, 2024 and sell it today you would earn a total of  213.00  from holding Frontier Group Holdings or generate 59.83% return on investment over 90 days.

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

Frontier Group Holdings  vs.  SkyWest

Frontier Group Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Frontier Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

SkyWest

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 28 (%) 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.

Pair Trading with Frontier Group and SkyWest

The main advantage of trading using opposite Frontier Group and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Group 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 Frontier Group 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.