Correlation Between Allegiant Travel and Air Transport
Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Air Transport 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 Allegiant Travel and Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegiant Travel and Air Transport Services, you can compare the effects of market volatilities on Allegiant Travel and Air Transport 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 Allegiant Travel with a short position of Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Air Transport.
Diversification Opportunities for Allegiant Travel and Air Transport
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allegiant and Air is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and Allegiant Travel 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 Allegiant Travel are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Air Transport go up and down completely randomly.
Pair Corralation between Allegiant Travel and Air Transport
Given the investment horizon of 90 days Allegiant Travel is expected to generate 20.9 times more return on investment than Air Transport. However, Allegiant Travel is 20.9 times more volatile than Air Transport Services. It trades about 0.53 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.6 per unit of risk. If you would invest 8,447 in Allegiant Travel on October 21, 2024 and sell it today you would earn a total of 1,852 from holding Allegiant Travel or generate 21.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegiant Travel vs. Air Transport Services
Performance |
| Timeline |
| Allegiant Travel |
| Air Transport Services |
Allegiant Travel and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegiant Travel and Air Transport
The main advantage of trading using opposite Allegiant Travel and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.| Allegiant Travel vs. Azul SA | Allegiant Travel vs. Alaska Air Group | Allegiant Travel vs. International Consolidated Airlines | Allegiant Travel vs. Sun Country Airlines |
| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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