Correlation Between GM and Sun Country

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

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

Diversification Opportunities for GM and Sun Country

-0.09

Correlation Coefficient

GM  Sun Country

Good diversification

The 3 months correlation between GM and Sun is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Sun Country go up and down completely randomly.

Pair Corralation between GM and Sun Country

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.83 times more return on investment than Sun Country. However, General Motors is 1.21 times less risky than Sun Country. It trades about -0.01 of its potential returns per unit of risk. Sun Country Airlines is currently generating about -0.05 per unit of risk. If you would invest  5,404  in General Motors on December 25, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

General Motors  vs.  Sun Country Airlines

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Sun Country Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Country Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GM and Sun Country

The main advantage of trading using opposite GM and Sun Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.