Correlation Between Allegiant Travel and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Naked Wines 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 Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegiant Travel and Naked Wines plc, you can compare the effects of market volatilities on Allegiant Travel and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Naked Wines.
Diversification Opportunities for Allegiant Travel and Naked Wines
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allegiant and Naked is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Naked Wines go up and down completely randomly.
Pair Corralation between Allegiant Travel and Naked Wines
Given the investment horizon of 90 days Allegiant Travel is expected to generate 2.43 times more return on investment than Naked Wines. However, Allegiant Travel is 2.43 times more volatile than Naked Wines plc. It trades about 0.31 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.21 per unit of risk. If you would invest 6,296 in Allegiant Travel on August 31, 2024 and sell it today you would earn a total of 1,806 from holding Allegiant Travel or generate 28.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegiant Travel vs. Naked Wines plc
Performance |
| Timeline |
| Allegiant Travel |
| Naked Wines plc |
Allegiant Travel and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegiant Travel and Naked Wines
The main advantage of trading using opposite Allegiant Travel and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' 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 |
| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Brown Forman |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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