Correlation Between Sun Country and Eagle Bulk

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

Diversification Opportunities for Sun Country and Eagle Bulk

-0.09

Correlation Coefficient

Sun Country  Eagle Bulk

Good diversification

The 3 months correlation between Sun and Eagle is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Eagle Bulk Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bulk Shipping 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 Eagle Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bulk Shipping has no effect on the direction of Sun Country i.e., Sun Country and Eagle Bulk go up and down completely randomly.

Pair Corralation between Sun Country and Eagle Bulk

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.64 times more return on investment than Eagle Bulk. However, Sun Country is 1.64 times more volatile than Eagle Bulk Shipping. It trades about 0.17 of its potential returns per unit of risk. Eagle Bulk Shipping is currently generating about 0.03 per unit of risk. If you would invest  1,363  in Sun Country Airlines on January 20, 2024 and sell it today you would earn a total of  110.00  from holding Sun Country Airlines or generate 8.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.64%
Values	Daily Returns

Sun Country Airlines  vs.  Eagle Bulk Shipping

Sun Country Airlines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Country Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Sun Country may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Eagle Bulk Shipping

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Eagle Bulk Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather conflicting essential indicators, Eagle Bulk exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Country and Eagle Bulk

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

The idea behind Sun Country Airlines and Eagle Bulk Shipping 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.

Check out your portfolio center.

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.