Correlation Between Sun Country and Western Sierra

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

Diversification Opportunities for Sun Country and Western Sierra

0.52

Correlation Coefficient

Sun Country  Western Sierra

Very weak diversification

The 3 months correlation between Sun and Western is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Sun Country i.e., Sun Country and Western Sierra go up and down completely randomly.

Pair Corralation between Sun Country and Western Sierra

Given the investment horizon of 90 days Sun Country Airlines is expected to under-perform the Western Sierra. But the stock apears to be less risky and, when comparing its historical volatility, Sun Country Airlines is 42.59 times less risky than Western Sierra. The stock trades about -0.04 of its potential returns per unit of risk. The Western Sierra Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Western Sierra Mining on December 28, 2024 and sell it today you would lose (0.33) from holding Western Sierra Mining or give up 94.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Sun Country Airlines  vs.  Western Sierra Mining

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 abnormal 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.

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Country and Western Sierra

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

The idea behind Sun Country Airlines and Western Sierra Mining 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.