Correlation Between National Beverage and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Allegiant Travel, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Allegiant Travel.
Diversification Opportunities for National Beverage and Allegiant Travel
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Allegiant is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Allegiant Travel go up and down completely randomly.
Pair Corralation between National Beverage and Allegiant Travel
Given the investment horizon of 90 days National Beverage is expected to generate 3.53 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, National Beverage Corp is 2.45 times less risky than Allegiant Travel. It trades about 0.24 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.34 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. Allegiant Travel
Performance |
| Timeline |
| National Beverage Corp |
| Allegiant Travel |
National Beverage and Allegiant Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Allegiant Travel
The main advantage of trading using opposite National Beverage and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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