Correlation Between Sun Country and Iridium Communications

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

Diversification Opportunities for Sun Country and Iridium Communications

-0.35

Correlation Coefficient

Sun Country  Iridium Communications

Very good diversification

The 3 months correlation between Sun and Iridium is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Sun Country i.e., Sun Country and Iridium Communications go up and down completely randomly.

Pair Corralation between Sun Country and Iridium Communications

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.58 times more return on investment than Iridium Communications. However, Sun Country is 1.58 times more volatile than Iridium Communications. It trades about 0.18 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.13 per unit of risk. If you would invest  1,507  in Sun Country Airlines on October 22, 2024 and sell it today you would earn a total of  111.00  from holding Sun Country Airlines or generate 7.37% return on investment over 90 days.

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

Sun Country Airlines  vs.  Iridium Communications

Sun Country Airlines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 11 (%) 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.

Iridium Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sun Country and Iridium Communications

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

The idea behind Sun Country Airlines and Iridium Communications 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.