Correlation Between Alaska Air and SkyWest

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

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

Diversification Opportunities for Alaska Air and SkyWest

0.7

Correlation Coefficient

Alaska Air  SkyWest

Poor diversification

The 3 months correlation between Alaska and SkyWest is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Alaska Air 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 Alaska Air Group 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 Alaska Air i.e., Alaska Air and SkyWest go up and down completely randomly.

Pair Corralation between Alaska Air and SkyWest

Considering the 90-day investment horizon Alaska Air is expected to generate 1.06 times less return on investment than SkyWest. In addition to that, Alaska Air is 1.34 times more volatile than SkyWest. It trades about 0.06 of its total potential returns per unit of risk. SkyWest is currently generating about 0.08 per unit of volatility. If you would invest  7,593  in SkyWest on May 7, 2025 and sell it today you would earn a total of  3,328  from holding SkyWest or generate 43.83% return on investment over 90 days.

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

Alaska Air Group  vs.  SkyWest

Alaska Air Group

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air may actually be approaching a critical reversion point that can send shares even higher in September 2025.

SkyWest

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Air and SkyWest

The main advantage of trading using opposite Alaska Air and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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 Alaska Air Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.