Correlation Between Spirit Airlines and Global Crossing

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

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

Diversification Opportunities for Spirit Airlines and Global Crossing

0.46

Correlation Coefficient

Spirit Airlines  Global Crossing

Very weak diversification

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

Pair Corralation between Spirit Airlines and Global Crossing

Given the investment horizon of 90 days Spirit Airlines is expected to under-perform the Global Crossing. But the stock apears to be less risky and, when comparing its historical volatility, Spirit Airlines is 1.15 times less risky than Global Crossing. The stock trades about -0.06 of its potential returns per unit of risk. The Global Crossing Airlines is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Global Crossing Airlines on February 28, 2024 and sell it today you would lose (31.30) from holding Global Crossing Airlines or give up 39.13% of portfolio value over 90 days.

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

Spirit Airlines  vs.  Global Crossing Airlines

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.

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.

Pair Trading with Spirit Airlines and Global Crossing

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

The idea behind Spirit Airlines and Global Crossing 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.