Correlation Between Allegiant Travel and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Summit Materials 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 Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegiant Travel and Summit Materials, you can compare the effects of market volatilities on Allegiant Travel and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Summit Materials.
Diversification Opportunities for Allegiant Travel and Summit Materials
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Allegiant and Summit is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Summit Materials go up and down completely randomly.
Pair Corralation between Allegiant Travel and Summit Materials
Given the investment horizon of 90 days Allegiant Travel is expected to generate 3.34 times less return on investment than Summit Materials. In addition to that, Allegiant Travel is 1.5 times more volatile than Summit Materials. It trades about 0.01 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.06 per unit of volatility. If you would invest 3,601 in Summit Materials on September 12, 2024 and sell it today you would earn a total of 1,500 from holding Summit Materials or generate 41.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegiant Travel vs. Summit Materials
Performance |
| Timeline |
| Allegiant Travel |
| Summit Materials |
Allegiant Travel and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegiant Travel and Summit Materials
The main advantage of trading using opposite Allegiant Travel and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Allegiant Travel vs. Volaris | Allegiant Travel vs. flyExclusive, | Allegiant Travel vs. Alaska Air Group | Allegiant Travel vs. Copa Holdings SA |
| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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