Correlation Between LATAM Airlines and Sun Country

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

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

Diversification Opportunities for LATAM Airlines and Sun Country

0.0

Correlation Coefficient

LATAM Airlines  Sun Country

Pay attention - limited upside

The 3 months correlation between LATAM and Sun is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group 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 LATAM Airlines 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 LATAM Airlines Group 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 LATAM Airlines i.e., LATAM Airlines and Sun Country go up and down completely randomly.

Pair Corralation between LATAM Airlines and Sun Country

If you would invest (100.00) in LATAM Airlines Group on December 28, 2024 and sell it today you would earn a total of  100.00  from holding LATAM Airlines Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LATAM Airlines Group  vs.  Sun Country Airlines

LATAM Airlines Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LATAM Airlines is not utilizing all of its potentials. The latest stock price disturbance, 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 abnormal 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 LATAM Airlines and Sun Country

The main advantage of trading using opposite LATAM Airlines and Sun Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines 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 LATAM Airlines Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.