Correlation Between Sun Country and Stepstone

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

Diversification Opportunities for Sun Country and Stepstone

0.74

Correlation Coefficient

Sun Country  Stepstone

Poor diversification

The 3 months correlation between Sun and Stepstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Sun Country i.e., Sun Country and Stepstone go up and down completely randomly.

Pair Corralation between Sun Country and Stepstone

Given the investment horizon of 90 days Sun Country Airlines is expected to under-perform the Stepstone. But the stock apears to be less risky and, when comparing its historical volatility, Sun Country Airlines is 1.06 times less risky than Stepstone. The stock trades about -0.07 of its potential returns per unit of risk. The Stepstone Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,900  in Stepstone Group on September 2, 2024 and sell it today you would earn a total of  689.00  from holding Stepstone Group or generate 11.68% return on investment over 90 days.

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

Sun Country Airlines  vs.  Stepstone Group

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

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Country and Stepstone

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

The idea behind Sun Country Airlines and Stepstone Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..