Correlation Between Spirit Airlines and Delta Air

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

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

Diversification Opportunities for Spirit Airlines and Delta Air

-0.33

Correlation Coefficient

Spirit Airlines  Delta Air

Very good diversification

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

Pair Corralation between Spirit Airlines and Delta Air

Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the Delta Air. In addition to that, Spirit Airlines is 28.64 times more volatile than Delta Air Lines. It trades about -0.58 of its total potential returns per unit of risk. Delta Air Lines is currently generating about -0.18 per unit of volatility. If you would invest  6,324  in Delta Air Lines on September 19, 2024 and sell it today you would lose (436.00) from holding Delta Air Lines or give up 6.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.64%
Values	Daily Returns

Spirit Airlines  vs.  Delta Air Lines

Spirit Airlines

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Delta Air Lines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirit Airlines and Delta Air

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

The idea behind Spirit Airlines and Delta Air Lines 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.