Correlation Between Spirit Airlines and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both Spirit Airlines and Allegiant Travel 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 Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Airlines and Allegiant Travel, you can compare the effects of market volatilities on Spirit Airlines and Allegiant Travel 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 Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Airlines and Allegiant Travel.
Diversification Opportunities for Spirit Airlines and Allegiant Travel
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spirit and Allegiant is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Airlines and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel 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 Allegiant Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegiant Travel has no effect on the direction of Spirit Airlines i.e., Spirit Airlines and Allegiant Travel go up and down completely randomly.
Pair Corralation between Spirit Airlines and Allegiant Travel
Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the Allegiant Travel. In addition to that, Spirit Airlines is 1.73 times more volatile than Allegiant Travel. It trades about -0.26 of its total potential returns per unit of risk. Allegiant Travel is currently generating about -0.28 per unit of volatility. If you would invest 7,373 in Allegiant Travel on February 2, 2024 and sell it today you would lose (1,936) from holding Allegiant Travel or give up 26.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Spirit Airlines vs. Allegiant Travel
Performance |
Timeline |
Spirit Airlines |
Allegiant Travel |
Spirit Airlines and Allegiant Travel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spirit Airlines and Allegiant Travel
The main advantage of trading using opposite Spirit Airlines and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Airlines position performs unexpectedly, Allegiant Travel 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 Allegiant Travel will offset losses from the drop in Allegiant Travel's long position.Spirit Airlines vs. JetBlue Airways Corp | Spirit Airlines vs. United Airlines Holdings | Spirit Airlines vs. Frontier Group Holdings |
Allegiant Travel vs. JetBlue Airways Corp | Allegiant Travel vs. Spirit Airlines | Allegiant Travel vs. United Airlines Holdings | Allegiant Travel vs. Frontier Group 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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