Correlation Between Freeport and Sun Country

Can any of the company-specific risk be diversified away by investing in both Freeport and Sun Country 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 Freeport and Sun Country into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freeport McMoRan 5 percent and Sun Country Airlines, you can compare the effects of market volatilities on Freeport and Sun Country 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 Freeport with a short position of Sun Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Sun Country.

Diversification Opportunities for Freeport and Sun Country

-0.27

Correlation Coefficient

Freeport  Sun Country

Very good diversification

The 3 months correlation between Freeport and Sun is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 5 percent and Sun Country Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Country Airlines and Freeport 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 Freeport McMoRan 5 percent are associated (or correlated) with Sun Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Country Airlines has no effect on the direction of Freeport i.e., Freeport and Sun Country go up and down completely randomly.

Pair Corralation between Freeport and Sun Country

Assuming the 90 days trading horizon Freeport McMoRan 5 percent is expected to under-perform the Sun Country. But the bond apears to be less risky and, when comparing its historical volatility, Freeport McMoRan 5 percent is 2.59 times less risky than Sun Country. The bond trades about 0.0 of its potential returns per unit of risk. The Sun Country Airlines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,519  in Sun Country Airlines on October 16, 2024 and sell it today you would earn a total of  61.00  from holding Sun Country Airlines or generate 4.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Freeport McMoRan 5 percent  vs.  Sun Country Airlines

Freeport McMoRan 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 5 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sun Country Airlines

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 13 (%) 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.

Pair Trading with Freeport and Sun Country

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

The idea behind Freeport McMoRan 5 percent and Sun Country Airlines 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.