Correlation Between Werner Enterprises and SkyWest

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

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

Diversification Opportunities for Werner Enterprises and SkyWest

0.8

Correlation Coefficient

Werner Enterprises  SkyWest

Very poor diversification

The 3 months correlation between Werner and SkyWest is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest and Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and SkyWest go up and down completely randomly.

Pair Corralation between Werner Enterprises and SkyWest

Given the investment horizon of 90 days Werner Enterprises is expected to under-perform the SkyWest. But the stock apears to be less risky and, when comparing its historical volatility, Werner Enterprises is 1.57 times less risky than SkyWest. The stock trades about -0.03 of its potential returns per unit of risk. The SkyWest is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,849  in SkyWest on September 27, 2024 and sell it today you would earn a total of  8,484  from holding SkyWest or generate 458.84% return on investment over 90 days.

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

Werner Enterprises  vs.  SkyWest

Werner Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Werner Enterprises is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SkyWest

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 12 (%) 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 Werner Enterprises and SkyWest

The main advantage of trading using opposite Werner Enterprises and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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 Werner Enterprises 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.