Correlation Between Sun Country and IPG Photonics

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

Diversification Opportunities for Sun Country and IPG Photonics

0.14

Correlation Coefficient

Sun Country  IPG Photonics

Average diversification

The 3 months correlation between Sun and IPG is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Sun Country i.e., Sun Country and IPG Photonics go up and down completely randomly.

Pair Corralation between Sun Country and IPG Photonics

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.23 times more return on investment than IPG Photonics. However, Sun Country is 1.23 times more volatile than IPG Photonics. It trades about -0.05 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.08 per unit of risk. If you would invest  1,515  in Sun Country Airlines on December 25, 2024 and sell it today you would lose (158.00) from holding Sun Country Airlines or give up 10.43% of portfolio value over 90 days.

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

Sun Country Airlines  vs.  IPG Photonics

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.

IPG Photonics

Risk-Adjusted Performance

Very Weak

Over the last 90 days IPG Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sun Country and IPG Photonics

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

The idea behind Sun Country Airlines and IPG Photonics 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.