Correlation Between SkyWest and Sun Country

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

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

Diversification Opportunities for SkyWest and Sun Country

0.87

Correlation Coefficient

SkyWest  Sun Country

Very poor diversification

The 3 months correlation between SkyWest and Sun is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SkyWest 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 SkyWest 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 SkyWest 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 SkyWest i.e., SkyWest and Sun Country go up and down completely randomly.

Pair Corralation between SkyWest and Sun Country

Given the investment horizon of 90 days SkyWest is expected to generate 0.53 times more return on investment than Sun Country. However, SkyWest is 1.89 times less risky than Sun Country. It trades about 0.36 of its potential returns per unit of risk. Sun Country Airlines is currently generating about 0.14 per unit of risk. If you would invest  7,530  in SkyWest on August 31, 2024 and sell it today you would earn a total of  3,866  from holding SkyWest or generate 51.34% return on investment over 90 days.

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

SkyWest  vs.  Sun Country Airlines

SkyWest

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.

Sun Country Airlines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Sun Country showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SkyWest and Sun Country

The main advantage of trading using opposite SkyWest and Sun Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SkyWest 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 SkyWest 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.