Correlation Between Stepstone and Allegiant Travel
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and Allegiant Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Allegiant Travel, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Allegiant Travel.
Diversification Opportunities for Stepstone and Allegiant Travel
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stepstone and Allegiant is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and Allegiant Travel go up and down completely randomly.
Pair Corralation between Stepstone and Allegiant Travel
Given the investment horizon of 90 days Stepstone is expected to generate 1.93 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, Stepstone Group is 1.25 times less risky than Allegiant Travel. It trades about 0.19 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 6,596 in Allegiant Travel on September 3, 2024 and sell it today you would earn a total of 1,588 from holding Allegiant Travel or generate 24.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Allegiant Travel
Performance |
| Timeline |
| Stepstone Group |
| Allegiant Travel |
Stepstone and Allegiant Travel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Allegiant Travel
The main advantage of trading using opposite Stepstone and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| Allegiant Travel vs. Copa Holdings SA | Allegiant Travel vs. SkyWest | Allegiant Travel vs. Air Transport Services | Allegiant Travel vs. Mesa Air Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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