Correlation Between American Eagle and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both American Eagle 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 American Eagle and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and Allegiant Travel, you can compare the effects of market volatilities on American Eagle 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 American Eagle with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and Allegiant Travel.
Diversification Opportunities for American Eagle and Allegiant Travel
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Allegiant is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and American Eagle 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 American Eagle Outfitters 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 American Eagle i.e., American Eagle and Allegiant Travel go up and down completely randomly.
Pair Corralation between American Eagle and Allegiant Travel
Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the Allegiant Travel. But the stock apears to be less risky and, when comparing its historical volatility, American Eagle Outfitters is 1.09 times less risky than Allegiant Travel. The stock trades about -0.12 of its potential returns per unit of risk. The Allegiant Travel is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 6,338 in Allegiant Travel on September 19, 2024 and sell it today you would earn a total of 2,035 from holding Allegiant Travel or generate 32.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. Allegiant Travel
Performance |
| Timeline |
| American Eagle Outfitters |
| Allegiant Travel |
American Eagle and Allegiant Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and Allegiant Travel
The main advantage of trading using opposite American Eagle and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle 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.| American Eagle vs. Capri Holdings | American Eagle vs. Movado Group | American Eagle vs. Tapestry | American Eagle vs. Brilliant Earth Group |
| Allegiant Travel vs. Azul SA | Allegiant Travel vs. Alaska Air Group | Allegiant Travel vs. International Consolidated Airlines | Allegiant Travel vs. Sun Country Airlines |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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