Correlation Between Spirit Airlines and Air Transport

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

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

Diversification Opportunities for Spirit Airlines and Air Transport

0.0

Correlation Coefficient

Spirit Airlines  Air Transport

Pay attention - limited upside

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

Pair Corralation between Spirit Airlines and Air Transport

If you would invest  2,199  in Air Transport Services on January 5, 2025 and sell it today you would earn a total of  41.00  from holding Air Transport Services or generate 1.86% return on investment over 90 days.

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

Spirit Airlines  vs.  Air Transport Services

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.

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 17 (%) 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.

Pair Trading with Spirit Airlines and Air Transport

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

The idea behind Spirit Airlines and Air Transport Services 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.