Correlation Between Sun Country and United Rentals

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

Diversification Opportunities for Sun Country and United Rentals

-0.27

Correlation Coefficient

Sun Country  United Rentals

Very good diversification

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

Pair Corralation between Sun Country and United Rentals

Given the investment horizon of 90 days Sun Country Airlines is expected to under-perform the United Rentals. In addition to that, Sun Country is 1.21 times more volatile than United Rentals. It trades about -0.09 of its total potential returns per unit of risk. United Rentals is currently generating about 0.15 per unit of volatility. If you would invest  46,505  in United Rentals on February 21, 2024 and sell it today you would earn a total of  22,795  from holding United Rentals or generate 49.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sun Country Airlines  vs.  United Rentals

Sun Country Airlines

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

United Rentals

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Sun Country and United Rentals

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

The idea behind Sun Country Airlines and United Rentals 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.