Correlation Between Allegiant Travel and 060505EN0

Can any of the company-specific risk be diversified away by investing in both Allegiant Travel and 060505EN0 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 060505EN0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allegiant Travel and BANK AMER P, you can compare the effects of market volatilities on Allegiant Travel and 060505EN0 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 060505EN0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and 060505EN0.

Diversification Opportunities for Allegiant Travel and 060505EN0

-0.4

Correlation Coefficient

Allegiant Travel  060505EN0

Very good diversification

The 3 months correlation between Allegiant and 060505EN0 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and BANK AMER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK AMER P 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 060505EN0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK AMER P has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and 060505EN0 go up and down completely randomly.

Pair Corralation between Allegiant Travel and 060505EN0

Given the investment horizon of 90 days Allegiant Travel is expected to generate 5.71 times more return on investment than 060505EN0. However, Allegiant Travel is 5.71 times more volatile than BANK AMER P. It trades about 0.36 of its potential returns per unit of risk. BANK AMER P is currently generating about 0.02 per unit of risk. If you would invest  4,107  in Allegiant Travel on September 15, 2024 and sell it today you would earn a total of  4,383  from holding Allegiant Travel or generate 106.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Allegiant Travel  vs.  BANK AMER P

Allegiant Travel

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 28 (%) 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.

BANK AMER P

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BANK AMER P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 060505EN0 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allegiant Travel and 060505EN0

The main advantage of trading using opposite Allegiant Travel and 060505EN0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, 060505EN0 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 060505EN0 will offset losses from the drop in 060505EN0's long position.

The idea behind Allegiant Travel and BANK AMER P 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.