Correlation Between Spirit Airlines and Expedia
Can any of the company-specific risk be diversified away by investing in both Spirit Airlines and Expedia 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 Expedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Airlines and Expedia Group, you can compare the effects of market volatilities on Spirit Airlines and Expedia 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 Expedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Airlines and Expedia.
Diversification Opportunities for Spirit Airlines and Expedia
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spirit and Expedia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Airlines and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Spirit Airlines i.e., Spirit Airlines and Expedia go up and down completely randomly.
Pair Corralation between Spirit Airlines and Expedia
Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the Expedia. In addition to that, Spirit Airlines is 2.9 times more volatile than Expedia Group. It trades about -0.25 of its total potential returns per unit of risk. Expedia Group is currently generating about -0.01 per unit of volatility. If you would invest 13,662 in Expedia Group on January 26, 2024 and sell it today you would lose (82.00) from holding Expedia Group or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirit Airlines vs. Expedia Group
Performance |
| Timeline |
| Spirit Airlines |
| Expedia Group |
Spirit Airlines and Expedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirit Airlines and Expedia
The main advantage of trading using opposite Spirit Airlines and Expedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Airlines position performs unexpectedly, Expedia 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 Expedia will offset losses from the drop in Expedia'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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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