Correlation Between Sun Country and Coca Cola

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

Diversification Opportunities for Sun Country and Coca Cola

-0.33

Correlation Coefficient

Sun Country  Coca Cola

Very good diversification

The 3 months correlation between Sun and Coca is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Sun Country i.e., Sun Country and Coca Cola go up and down completely randomly.

Pair Corralation between Sun Country and Coca Cola

Given the investment horizon of 90 days Sun Country Airlines is expected to under-perform the Coca Cola. In addition to that, Sun Country is 3.1 times more volatile than The Coca Cola. It trades about -0.02 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.01 per unit of volatility. If you would invest  6,208  in The Coca Cola on February 5, 2024 and sell it today you would earn a total of  9.00  from holding The Coca Cola or generate 0.14% 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.  The Coca Cola

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 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.

Coca Cola

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Coca Cola is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sun Country and Coca Cola

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

The idea behind Sun Country Airlines and The Coca Cola 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.