Correlation Between Citigroup and Spirit Airlines

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

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

Diversification Opportunities for Citigroup and Spirit Airlines

-0.8

Correlation Coefficient

Citigroup  Spirit Airlines

Pay attention - limited upside

The 3 months correlation between Citigroup and Spirit is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spirit Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Airlines and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Spirit Airlines go up and down completely randomly.

Pair Corralation between Citigroup and Spirit Airlines

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.2 times more return on investment than Spirit Airlines. However, Citigroup is 5.01 times less risky than Spirit Airlines. It trades about 0.24 of its potential returns per unit of risk. Spirit Airlines is currently generating about -0.09 per unit of risk. If you would invest  3,923  in Citigroup on February 15, 2024 and sell it today you would earn a total of  2,436  from holding Citigroup or generate 62.1% return on investment over 90 days.

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

Citigroup  vs.  Spirit Airlines

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting 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 Citigroup and Spirit Airlines

The main advantage of trading using opposite Citigroup and Spirit Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.