Correlation Between Allegiant Travel and Azul SA

Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and Azul SA 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 Allegiant Travel and Azul SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allegiant Travel and Azul SA, you can compare the effects of market volatilities on Allegiant Travel and Azul SA 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 Allegiant Travel with a short position of Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Azul SA.

Diversification Opportunities for Allegiant Travel and Azul SA

-0.12

Correlation Coefficient

Allegiant Travel  Azul SA

Good diversification

The 3 months correlation between Allegiant and Azul is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA and Allegiant Travel 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 Allegiant Travel are associated (or correlated) with Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Azul SA go up and down completely randomly.

Pair Corralation between Allegiant Travel and Azul SA

Given the investment horizon of 90 days Allegiant Travel is expected to generate 0.5 times more return on investment than Azul SA. However, Allegiant Travel is 2.01 times less risky than Azul SA. It trades about 0.35 of its potential returns per unit of risk. Azul SA is currently generating about 0.04 per unit of risk. If you would invest  4,106  in Allegiant Travel on August 31, 2024 and sell it today you would earn a total of  3,996  from holding Allegiant Travel or generate 97.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Allegiant Travel  vs.  Azul SA

Allegiant Travel

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Allegiant Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Azul SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azul SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Azul SA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegiant Travel and Azul SA

The main advantage of trading using opposite Allegiant Travel and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Azul SA 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 Azul SA will offset losses from the drop in Azul SA's long position.

The idea behind Allegiant Travel and Azul SA 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.