Correlation Between Allegiant Travel and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Fevertree Drinks 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 Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegiant Travel and Fevertree Drinks Plc, you can compare the effects of market volatilities on Allegiant Travel and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Fevertree Drinks.
Diversification Opportunities for Allegiant Travel and Fevertree Drinks
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Allegiant and Fevertree is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Allegiant Travel and Fevertree Drinks
Given the investment horizon of 90 days Allegiant Travel is expected to generate 3.6 times more return on investment than Fevertree Drinks. However, Allegiant Travel is 3.6 times more volatile than Fevertree Drinks Plc. It trades about 0.34 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.34 per unit of risk. If you would invest 6,301 in Allegiant Travel on September 2, 2024 and sell it today you would earn a total of 1,883 from holding Allegiant Travel or generate 29.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegiant Travel vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Allegiant Travel |
| Fevertree Drinks Plc |
Allegiant Travel and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegiant Travel and Fevertree Drinks
The main advantage of trading using opposite Allegiant Travel and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' 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 |
| Fevertree Drinks vs. PepsiCo | Fevertree Drinks vs. Coca Cola Consolidated | Fevertree Drinks vs. Monster Beverage Corp | Fevertree Drinks vs. Celsius 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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