Correlation Between Sun Country and Volaris

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Can any of the company-specific risk be diversified away by investing in both Sun Country and Volaris 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 Volaris 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 Volaris, you can compare the effects of market volatilities on Sun Country and Volaris 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 Volaris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Country and Volaris.

Diversification Opportunities for Sun Country and Volaris

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sun and Volaris is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of Sun Country i.e., Sun Country and Volaris go up and down completely randomly.

Pair Corralation between Sun Country and Volaris

Given the investment horizon of 90 days Sun Country is expected to generate 1.42 times less return on investment than Volaris. In addition to that, Sun Country is 1.25 times more volatile than Volaris. It trades about 0.0 of its total potential returns per unit of risk. Volaris is currently generating about 0.01 per unit of volatility. If you would invest  806.00  in Volaris on August 26, 2024 and sell it today you would lose (29.00) from holding Volaris or give up 3.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sun Country Airlines  vs.  Volaris

 Performance 
       Timeline  
Sun Country Airlines 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Sun Country showed solid returns over the last few months and may actually be approaching a breakup point.
Volaris 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sun Country and Volaris Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Country and Volaris

The main advantage of trading using opposite Sun Country and Volaris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Country position performs unexpectedly, Volaris 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 Volaris will offset losses from the drop in Volaris' long position.
The idea behind Sun Country Airlines and Volaris 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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