Correlation Between United Parks and Sun Country

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

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

Diversification Opportunities for United Parks and Sun Country

0.84

Correlation Coefficient

United Parks  Sun Country

Very poor diversification

The 3 months correlation between United and Sun is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts 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 United Parks 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 United Parks Resorts 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 United Parks i.e., United Parks and Sun Country go up and down completely randomly.

Pair Corralation between United Parks and Sun Country

Given the investment horizon of 90 days United Parks Resorts is expected to under-perform the Sun Country. But the stock apears to be less risky and, when comparing its historical volatility, United Parks Resorts is 1.36 times less risky than Sun Country. The stock trades about -0.08 of its potential returns per unit of risk. The Sun Country Airlines is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,362  in Sun Country Airlines on September 20, 2024 and sell it today you would earn a total of  73.00  from holding Sun Country Airlines or generate 5.36% return on investment over 90 days.

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

United Parks Resorts  vs.  Sun Country Airlines

United Parks Resorts

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, United Parks is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady fundamental indicators, Sun Country showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parks and Sun Country

The main advantage of trading using opposite United Parks and Sun Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parks 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 United Parks Resorts 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.