Correlation Between Sun Country and XPO Logistics

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

Diversification Opportunities for Sun Country and XPO Logistics

0.9

Correlation Coefficient

Sun Country  XPO Logistics

Almost no diversification

The 3 months correlation between Sun and XPO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and XPO Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPO Logistics 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 XPO Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPO Logistics has no effect on the direction of Sun Country i.e., Sun Country and XPO Logistics go up and down completely randomly.

Pair Corralation between Sun Country and XPO Logistics

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.24 times more return on investment than XPO Logistics. However, Sun Country is 1.24 times more volatile than XPO Logistics. It trades about 0.07 of its potential returns per unit of risk. XPO Logistics is currently generating about 0.08 per unit of risk. If you would invest  1,194  in Sun Country Airlines on September 22, 2024 and sell it today you would earn a total of  306.00  from holding Sun Country Airlines or generate 25.63% return on investment over 90 days.

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

Sun Country Airlines  vs.  XPO Logistics

Sun Country Airlines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 12 (%) 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.

XPO Logistics

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Sun Country and XPO Logistics

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

The idea behind Sun Country Airlines and XPO Logistics 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.