Correlation Between Sun Country and Catalent

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

Diversification Opportunities for Sun Country and Catalent

0.07

Correlation Coefficient

Sun Country  Catalent

Significant diversification

The 3 months correlation between Sun and Catalent is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Sun Country i.e., Sun Country and Catalent go up and down completely randomly.

Pair Corralation between Sun Country and Catalent

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 5.44 times more return on investment than Catalent. However, Sun Country is 5.44 times more volatile than Catalent. It trades about 0.16 of its potential returns per unit of risk. Catalent is currently generating about 0.14 per unit of risk. If you would invest  1,105  in Sun Country Airlines on September 26, 2024 and sell it today you would earn a total of  402.00  from holding Sun Country Airlines or generate 36.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Sun Country Airlines  vs.  Catalent

Sun Country Airlines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 12 (%) 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.

Catalent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sun Country and Catalent

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

The idea behind Sun Country Airlines and Catalent 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.