Correlation Between Air Transport and Spirit Airlines

Can any of the company-specific risk be diversified away by investing in both Air Transport and Spirit Airlines 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 Air Transport and Spirit Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Transport Services and Spirit Airlines, you can compare the effects of market volatilities on Air Transport and Spirit Airlines 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 Air Transport with a short position of Spirit Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Spirit Airlines.

Diversification Opportunities for Air Transport and Spirit Airlines

0.0

Correlation Coefficient

Air Transport  Spirit Airlines

Pay attention - limited upside

The 3 months correlation between Air and Spirit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Spirit Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Airlines and Air Transport 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 Air Transport Services are associated (or correlated) with Spirit Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Airlines has no effect on the direction of Air Transport i.e., Air Transport and Spirit Airlines go up and down completely randomly.

Pair Corralation between Air Transport and Spirit Airlines

If you would invest  2,197  in Air Transport Services on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Air Transport Services or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Air Transport Services  vs.  Spirit Airlines

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Spirit Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spirit Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Spirit Airlines is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Transport and Spirit Airlines

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

The idea behind Air Transport Services and Spirit Airlines 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.