Correlation Between Spirit Airlines and Azul SA
Can any of the company-specific risk be diversified away by investing in both Spirit Airlines and Azul SA 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 Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Airlines and Azul SA, you can compare the effects of market volatilities on Spirit Airlines and Azul SA 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 Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Airlines and Azul SA.
Diversification Opportunities for Spirit Airlines and Azul SA
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirit and Azul is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Airlines and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Spirit Airlines i.e., Spirit Airlines and Azul SA go up and down completely randomly.
Pair Corralation between Spirit Airlines and Azul SA
Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the Azul SA. In addition to that, Spirit Airlines is 7.62 times more volatile than Azul SA. It trades about -0.31 of its total potential returns per unit of risk. Azul SA is currently generating about -0.16 per unit of volatility. If you would invest 299.00 in Azul SA on August 31, 2024 and sell it today you would lose (38.00) from holding Azul SA or give up 12.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 72.73% |
| Values | Daily Returns |
Spirit Airlines vs. Azul SA
Performance |
| Timeline |
| Spirit Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Azul SA |
Spirit Airlines and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirit Airlines and Azul SA
The main advantage of trading using opposite Spirit Airlines and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Airlines position performs unexpectedly, Azul SA 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 Azul SA will offset losses from the drop in Azul SA's 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 |
| Azul SA vs. JetBlue Airways Corp | Azul SA vs. Allegiant Travel | Azul SA vs. SkyWest | Azul SA vs. Air Transport Services |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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