Correlation Between International Consolidated and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both International Consolidated and Allegiant Travel 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 International Consolidated and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Allegiant Travel, you can compare the effects of market volatilities on International Consolidated and Allegiant Travel 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 International Consolidated with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Allegiant Travel.
Diversification Opportunities for International Consolidated and Allegiant Travel
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Allegiant is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Allegiant Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegiant Travel has no effect on the direction of International Consolidated i.e., International Consolidated and Allegiant Travel go up and down completely randomly.
Pair Corralation between International Consolidated and Allegiant Travel
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.37 times more return on investment than Allegiant Travel. However, International Consolidated is 1.37 times more volatile than Allegiant Travel. It trades about 0.09 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.11 per unit of risk. If you would invest 205.00 in International Consolidated Airlines on August 24, 2024 and sell it today you would earn a total of 115.00 from holding International Consolidated Airlines or generate 56.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
International Consolidated Air vs. Allegiant Travel
Performance |
| Timeline |
| International Consolidated |
| Allegiant Travel |
International Consolidated and Allegiant Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Allegiant Travel
The main advantage of trading using opposite International Consolidated and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated position performs unexpectedly, Allegiant Travel 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 Allegiant Travel will offset losses from the drop in Allegiant Travel's long position.| International Consolidated vs. Deutsche Lufthansa AG | International Consolidated vs. Air France KLM | International Consolidated vs. Singapore Airlines | International Consolidated vs. Sun Country Airlines |
| Allegiant Travel vs. Azul SA | Allegiant Travel vs. Alaska Air Group | Allegiant Travel vs. International Consolidated Airlines | Allegiant Travel vs. Sun Country Airlines |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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