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

-0.21

Correlation Coefficient

Sun Country  United Rentals

Very good diversification

The 3 months correlation between Sun and United is -0.21. 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. But the stock apears to be less risky and, when comparing its historical volatility, Sun Country Airlines is 1.18 times less risky than United Rentals. The stock trades about -0.23 of its potential returns per unit of risk. The United Rentals is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  71,015  in United Rentals on February 1, 2024 and sell it today you would lose (4,216) from holding United Rentals or give up 5.94% of portfolio value 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

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 unsteady 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.

United Rentals

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..