Correlation Between Sun Country and Ryanair Holdings

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

Diversification Opportunities for Sun Country and Ryanair Holdings

0.28

Correlation Coefficient

Sun Country  Ryanair Holdings

Modest diversification

The 3 months correlation between Sun and Ryanair is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Ryanair Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryanair Holdings PLC 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 Ryanair Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryanair Holdings PLC has no effect on the direction of Sun Country i.e., Sun Country and Ryanair Holdings go up and down completely randomly.

Pair Corralation between Sun Country and Ryanair Holdings

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 1.29 times more return on investment than Ryanair Holdings. However, Sun Country is 1.29 times more volatile than Ryanair Holdings PLC. It trades about 0.01 of its potential returns per unit of risk. Ryanair Holdings PLC is currently generating about -0.13 per unit of risk. If you would invest  1,430  in Sun Country Airlines on January 25, 2024 and sell it today you would lose (1.00) from holding Sun Country Airlines or give up 0.07% of portfolio value over 90 days.

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

Sun Country Airlines  vs.  Ryanair Holdings PLC

Sun Country Airlines

Risk-Adjusted Performance

0 of 100

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 fairly strong fundamental indicators, Sun Country is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Ryanair Holdings PLC

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Sun Country and Ryanair Holdings

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

The idea behind Sun Country Airlines and Ryanair Holdings PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.