Correlation Between Garmin and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both Garmin 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 Garmin and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Garmin and Allegiant Travel, you can compare the effects of market volatilities on Garmin 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 Garmin with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garmin and Allegiant Travel.
Diversification Opportunities for Garmin and Allegiant Travel
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Garmin and Allegiant is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and Garmin 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 Garmin 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 Garmin i.e., Garmin and Allegiant Travel go up and down completely randomly.
Pair Corralation between Garmin and Allegiant Travel
Given the investment horizon of 90 days Garmin is expected to generate 4.73 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, Garmin is 2.37 times less risky than Allegiant Travel. It trades about 0.26 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 8,730 in Allegiant Travel on October 23, 2024 and sell it today you would earn a total of 1,800 from holding Allegiant Travel or generate 20.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Garmin vs. Allegiant Travel
Performance |
| Timeline |
| Garmin |
| Allegiant Travel |
Garmin and Allegiant Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Garmin and Allegiant Travel
The main advantage of trading using opposite Garmin and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garmin 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.| Garmin vs. Vontier Corp | Garmin vs. Teledyne Technologies Incorporated | Garmin vs. ESCO Technologies | Garmin vs. MKS Instruments |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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