Correlation Between SkyWest and CSX

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

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

Diversification Opportunities for SkyWest and CSX

0.77

Correlation Coefficient

SkyWest  CSX

Poor diversification

The 3 months correlation between SkyWest and CSX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation 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 CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of SkyWest i.e., SkyWest and CSX go up and down completely randomly.

Pair Corralation between SkyWest and CSX

Given the investment horizon of 90 days SkyWest is expected to generate 1.11 times more return on investment than CSX. However, SkyWest is 1.11 times more volatile than CSX Corporation. It trades about 0.52 of its potential returns per unit of risk. CSX Corporation is currently generating about 0.4 per unit of risk. If you would invest  8,345  in SkyWest on February 19, 2025 and sell it today you would earn a total of  1,694  from holding SkyWest or generate 20.3% return on investment over 90 days.

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

SkyWest  vs.  CSX Corp.

SkyWest

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SkyWest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CSX Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CSX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SkyWest and CSX

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

The idea behind SkyWest and CSX Corporation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.