Correlation Between Allegiant Travel and Adkins Energy

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

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

Diversification Opportunities for Allegiant Travel and Adkins Energy

0.75

Correlation Coefficient

Allegiant Travel  Adkins Energy

Poor diversification

The 3 months correlation between Allegiant and Adkins is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Adkins Energy LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adkins Energy LLC 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 Adkins Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adkins Energy LLC has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Adkins Energy go up and down completely randomly.

Pair Corralation between Allegiant Travel and Adkins Energy

Given the investment horizon of 90 days Allegiant Travel is expected to generate 3.37 times more return on investment than Adkins Energy. However, Allegiant Travel is 3.37 times more volatile than Adkins Energy LLC. It trades about 0.3 of its potential returns per unit of risk. Adkins Energy LLC is currently generating about 0.13 per unit of risk. If you would invest  5,837  in Allegiant Travel on October 11, 2024 and sell it today you would earn a total of  4,093  from holding Allegiant Travel or generate 70.12% return on investment over 90 days.

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

Allegiant Travel  vs.  Adkins Energy LLC

Allegiant Travel

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 23 (%) 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.

Adkins Energy LLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adkins Energy LLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, Adkins Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allegiant Travel and Adkins Energy

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

The idea behind Allegiant Travel and Adkins Energy LLC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.