Correlation Between NYSE Composite and Allegiant Travel

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Allegiant Travel, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Allegiant Travel.

Diversification Opportunities for NYSE Composite and Allegiant Travel

NYSEAllegiantDiversified AwayNYSEAllegiantDiversified Away100%
-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between NYSE and Allegiant is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Allegiant Travel go up and down completely randomly.
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Pair Corralation between NYSE Composite and Allegiant Travel

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.14 times more return on investment than Allegiant Travel. However, NYSE Composite is 6.92 times less risky than Allegiant Travel. It trades about -0.04 of its potential returns per unit of risk. Allegiant Travel is currently generating about -0.34 per unit of risk. If you would invest  1,992,747  in NYSE Composite on November 30, 2024 and sell it today you would lose (11,932) from holding NYSE Composite or give up 0.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  Allegiant Travel

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 010203040
JavaScript chart by amCharts 3.21.15NYA ALGT
       Timeline  

NYSE Composite and Allegiant Travel Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.16-1.62-1.08-0.54-0.0090220.51.041.582.122.66 0.20.40.60.8
JavaScript chart by amCharts 3.21.15NYA ALGT
       Returns  

Pair Trading with NYSE Composite and Allegiant Travel

The main advantage of trading using opposite NYSE Composite and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.
The idea behind NYSE Composite and Allegiant Travel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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