Correlation Between Sun Country and NATIONAL

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

Diversification Opportunities for Sun Country and NATIONAL

0.37

Correlation Coefficient

Sun Country  NATIONAL

Weak diversification

The 3 months correlation between Sun and NATIONAL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and NATIONAL AUSTRALIA BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL AUSTRALIA 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 NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL AUSTRALIA has no effect on the direction of Sun Country i.e., Sun Country and NATIONAL go up and down completely randomly.

Pair Corralation between Sun Country and NATIONAL

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 6.47 times more return on investment than NATIONAL. However, Sun Country is 6.47 times more volatile than NATIONAL AUSTRALIA BK. It trades about 0.15 of its potential returns per unit of risk. NATIONAL AUSTRALIA BK is currently generating about -0.01 per unit of risk. If you would invest  1,104  in Sun Country Airlines on September 22, 2024 and sell it today you would earn a total of  396.00  from holding Sun Country Airlines or generate 35.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Sun Country Airlines  vs.  NATIONAL AUSTRALIA BK

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.

NATIONAL AUSTRALIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL AUSTRALIA BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sun Country and NATIONAL

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

The idea behind Sun Country Airlines and NATIONAL AUSTRALIA BK 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.