Correlation Between Western Sierra and Sun Country

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

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

Diversification Opportunities for Western Sierra and Sun Country

0.52

Correlation Coefficient

Western Sierra  Sun Country

Very weak diversification

The 3 months correlation between Western and Sun is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining 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 Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and Sun Country go up and down completely randomly.

Pair Corralation between Western Sierra and Sun Country

Given the investment horizon of 90 days Western Sierra Mining is expected to generate 42.59 times more return on investment than Sun Country. However, Western Sierra is 42.59 times more volatile than Sun Country Airlines. It trades about 0.11 of its potential returns per unit of risk. Sun Country Airlines is currently generating about -0.04 per unit of risk. 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

Western Sierra Mining  vs.  Sun Country Airlines

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.

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.

Pair Trading with Western Sierra and Sun Country

The main advantage of trading using opposite Western Sierra and Sun Country positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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 Western Sierra Mining 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.