Correlation Between National Beverage and Sun Country

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

By analyzing existing cross correlation between National Beverage Corp and Sun Country Airlines, you can compare the effects of market volatilities on National Beverage and Sun Country 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 National Beverage with a short position of Sun Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Sun Country.

Diversification Opportunities for National Beverage and Sun Country

0.63

Correlation Coefficient

National Beverage  Sun Country

Poor diversification

The 3 months correlation between National and Sun is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Sun Country Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Country Airlines and National Beverage 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 National Beverage Corp are associated (or correlated) with Sun Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Country Airlines has no effect on the direction of National Beverage i.e., National Beverage and Sun Country go up and down completely randomly.

Pair Corralation between National Beverage and Sun Country

Given the investment horizon of 90 days National Beverage is expected to generate 109.84 times less return on investment than Sun Country. But when comparing it to its historical volatility, National Beverage Corp is 2.26 times less risky than Sun Country. It trades about 0.0 of its potential returns per unit of risk. Sun Country Airlines is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,137  in Sun Country Airlines on September 24, 2024 and sell it today you would earn a total of  363.00  from holding Sun Country Airlines or generate 31.93% return on investment over 90 days.

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

National Beverage Corp  vs.  Sun Country Airlines

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sun Country Airlines

Risk-Adjusted Performance

11 of 100

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.

Pair Trading with National Beverage and Sun Country

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

The idea behind National Beverage Corp and Sun Country Airlines 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.