Correlation Between Sun Country and Dennys Corp
Can any of the company-specific risk be diversified away by investing in both Sun Country and Dennys Corp 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 Sun Country and Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Country Airlines and Dennys Corp, you can compare the effects of market volatilities on Sun Country and Dennys Corp 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 Sun Country with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Country and Dennys Corp.
Diversification Opportunities for Sun Country and Dennys Corp
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sun and Dennys is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and Sun Country 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 Sun Country Airlines are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Sun Country i.e., Sun Country and Dennys Corp go up and down completely randomly.
Pair Corralation between Sun Country and Dennys Corp
Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.34 times more return on investment than Dennys Corp. However, Sun Country is 1.34 times more volatile than Dennys Corp. It trades about 0.14 of its potential returns per unit of risk. Dennys Corp is currently generating about 0.01 per unit of risk. If you would invest 1,233 in Sun Country Airlines on August 25, 2024 and sell it today you would earn a total of 140.00 from holding Sun Country Airlines or generate 11.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Country Airlines vs. Dennys Corp
Performance |
| Timeline |
| Sun Country Airlines |
| Dennys Corp |
Sun Country and Dennys Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Country and Dennys Corp
The main advantage of trading using opposite Sun Country and Dennys Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Country position performs unexpectedly, Dennys Corp 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 Dennys Corp will offset losses from the drop in Dennys Corp's long position.The idea behind Sun Country Airlines and Dennys Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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