Correlation Between Global Crossing and Spirit Airlines

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

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

Diversification Opportunities for Global Crossing and Spirit Airlines

0.46

Correlation Coefficient

Global Crossing  Spirit Airlines

Very weak diversification

The 3 months correlation between Global and Spirit is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global Crossing Airlines and Spirit Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Airlines and Global Crossing 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 Global Crossing Airlines are associated (or correlated) with Spirit Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Airlines has no effect on the direction of Global Crossing i.e., Global Crossing and Spirit Airlines go up and down completely randomly.

Pair Corralation between Global Crossing and Spirit Airlines

Assuming the 90 days horizon Global Crossing Airlines is expected to generate 0.76 times more return on investment than Spirit Airlines. However, Global Crossing Airlines is 1.32 times less risky than Spirit Airlines. It trades about -0.07 of its potential returns per unit of risk. Spirit Airlines is currently generating about -0.15 per unit of risk. If you would invest  60.00  in Global Crossing Airlines on February 28, 2024 and sell it today you would lose (11.30) from holding Global Crossing Airlines or give up 18.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Global Crossing Airlines  vs.  Spirit Airlines

Global Crossing Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Crossing Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Global Crossing and Spirit Airlines

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

The idea behind Global Crossing Airlines and Spirit Airlines 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.