Correlation Between Sun Country and INGEVITY

Can any of the company-specific risk be diversified away by investing in both Sun Country and INGEVITY 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 INGEVITY 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 INGEVITY P 3875, you can compare the effects of market volatilities on Sun Country and INGEVITY 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 INGEVITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Country and INGEVITY.

Diversification Opportunities for Sun Country and INGEVITY

0.62

Correlation Coefficient

Sun Country  INGEVITY

Poor diversification

The 3 months correlation between Sun and INGEVITY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and INGEVITY P 3875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGEVITY P 3875 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 INGEVITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGEVITY P 3875 has no effect on the direction of Sun Country i.e., Sun Country and INGEVITY go up and down completely randomly.

Pair Corralation between Sun Country and INGEVITY

Given the investment horizon of 90 days Sun Country Airlines is expected to under-perform the INGEVITY. In addition to that, Sun Country is 2.36 times more volatile than INGEVITY P 3875. It trades about -0.08 of its total potential returns per unit of risk. INGEVITY P 3875 is currently generating about -0.1 per unit of volatility. If you would invest  9,202  in INGEVITY P 3875 on December 23, 2024 and sell it today you would lose (631.00) from holding INGEVITY P 3875 or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.16%
Values	Daily Returns

Sun Country Airlines  vs.  INGEVITY P 3875

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 unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

INGEVITY P 3875

Risk-Adjusted Performance

Very Weak

Over the last 90 days INGEVITY P 3875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGEVITY P 3875 investors.

Pair Trading with Sun Country and INGEVITY

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

The idea behind Sun Country Airlines and INGEVITY P 3875 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.