Correlation Between Sun Country and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Sun Country and Smith Douglas 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 Smith Douglas 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 Smith Douglas Homes, you can compare the effects of market volatilities on Sun Country and Smith Douglas 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 Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Country and Smith Douglas.
Diversification Opportunities for Sun Country and Smith Douglas
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sun and Smith is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Sun Country i.e., Sun Country and Smith Douglas go up and down completely randomly.
Pair Corralation between Sun Country and Smith Douglas
Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.07 times more return on investment than Smith Douglas. However, Sun Country is 1.07 times more volatile than Smith Douglas Homes. It trades about 0.16 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.01 per unit of risk. If you would invest 1,278 in Sun Country Airlines on August 31, 2024 and sell it today you would earn a total of 164.00 from holding Sun Country Airlines or generate 12.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Country Airlines vs. Smith Douglas Homes
Performance |
| Timeline |
| Sun Country Airlines |
| Smith Douglas Homes |
Sun Country and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Country and Smith Douglas
The main advantage of trading using opposite Sun Country and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Country position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' long position.| Sun Country vs. JetBlue Airways Corp | Sun Country vs. Allegiant Travel | Sun Country vs. SkyWest | Sun Country vs. Air Transport Services |
| Smith Douglas vs. EMCOR Group | Smith Douglas vs. CenterPoint Energy | Smith Douglas vs. Highway Holdings Limited | Smith Douglas vs. United Utilities Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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