Correlation Between Spirit Airlines and American Airlines
Can any of the company-specific risk be diversified away by investing in both Spirit Airlines and American 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 Spirit Airlines and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Airlines and American Airlines Group, you can compare the effects of market volatilities on Spirit Airlines and American 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 Spirit Airlines with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Airlines and American Airlines.
Diversification Opportunities for Spirit Airlines and American Airlines
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirit and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Airlines and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Spirit Airlines i.e., Spirit Airlines and American Airlines go up and down completely randomly.
Pair Corralation between Spirit Airlines and American Airlines
Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the American Airlines. In addition to that, Spirit Airlines is 8.21 times more volatile than American Airlines Group. It trades about -0.11 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.24 per unit of volatility. If you would invest 1,100 in American Airlines Group on August 26, 2024 and sell it today you would earn a total of 338.00 from holding American Airlines Group or generate 30.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.18% |
| Values | Daily Returns |
Spirit Airlines vs. American Airlines Group
Performance |
| Timeline |
| Spirit Airlines |
| American Airlines |
Spirit Airlines and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirit Airlines and American Airlines
The main advantage of trading using opposite Spirit Airlines and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Airlines position performs unexpectedly, American 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 American Airlines will offset losses from the drop in American Airlines' long position.| Spirit Airlines vs. American Airlines Group | Spirit Airlines vs. Delta Air Lines | Spirit Airlines vs. Southwest Airlines | Spirit Airlines vs. United Airlines Holdings |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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