Correlation Between Sun Country and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both Sun Country and Pearson PLC 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 Pearson PLC 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 Pearson PLC ADR, you can compare the effects of market volatilities on Sun Country and Pearson PLC 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 Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Country and Pearson PLC.
Diversification Opportunities for Sun Country and Pearson PLC
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sun and Pearson is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of Sun Country i.e., Sun Country and Pearson PLC go up and down completely randomly.
Pair Corralation between Sun Country and Pearson PLC
Given the investment horizon of 90 days Sun Country is expected to generate 10.08 times less return on investment than Pearson PLC. In addition to that, Sun Country is 2.35 times more volatile than Pearson PLC ADR. It trades about 0.01 of its total potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.22 per unit of volatility. If you would invest 1,490 in Pearson PLC ADR on September 3, 2024 and sell it today you would earn a total of 78.00 from holding Pearson PLC ADR or generate 5.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Country Airlines vs. Pearson PLC ADR
Performance |
| Timeline |
| Sun Country Airlines |
| Pearson PLC ADR |
Sun Country and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Country and Pearson PLC
The main advantage of trading using opposite Sun Country and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Country position performs unexpectedly, Pearson PLC 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 Pearson PLC will offset losses from the drop in Pearson PLC's long position.| Sun Country vs. Copa Holdings SA | Sun Country vs. SkyWest | Sun Country vs. Air Transport Services | Sun Country vs. Mesa Air Group |
| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. Gannett Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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