Correlation Between Allegiant Travel and Nextera Energy
Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Nextera Energy 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 Nextera Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegiant Travel and Nextera Energy, you can compare the effects of market volatilities on Allegiant Travel and Nextera Energy 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 Nextera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Nextera Energy.
Diversification Opportunities for Allegiant Travel and Nextera Energy
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Allegiant and Nextera is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy 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 Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Nextera Energy go up and down completely randomly.
Pair Corralation between Allegiant Travel and Nextera Energy
Given the investment horizon of 90 days Allegiant Travel is expected to generate 2.2 times more return on investment than Nextera Energy. However, Allegiant Travel is 2.2 times more volatile than Nextera Energy. It trades about 0.1 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.03 per unit of risk. If you would invest 6,062 in Allegiant Travel on October 14, 2024 and sell it today you would earn a total of 4,032 from holding Allegiant Travel or generate 66.51% 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. Nextera Energy
Performance |
| Timeline |
| Allegiant Travel |
| Nextera Energy |
Allegiant Travel and Nextera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegiant Travel and Nextera Energy
The main advantage of trading using opposite Allegiant Travel and Nextera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Nextera Energy 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 Nextera Energy will offset losses from the drop in Nextera Energy'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 |
| Nextera Energy vs. Alaska Air Group | Nextera Energy vs. Volaris | Nextera Energy vs. Allegiant Travel | Nextera Energy vs. Delta Air Lines |
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 Stocks Directory module to find actively traded stocks across global markets.
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