Correlation Between Allegiant Travel and Aeries Technology

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

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

Diversification Opportunities for Allegiant Travel and Aeries Technology

0.29

Correlation Coefficient

Allegiant Travel  Aeries Technology

Modest diversification

The 3 months correlation between Allegiant and Aeries is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Aeries Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeries Technology 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 Aeries Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeries Technology has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Aeries Technology go up and down completely randomly.

Pair Corralation between Allegiant Travel and Aeries Technology

Given the investment horizon of 90 days Allegiant Travel is expected to generate 21.41 times less return on investment than Aeries Technology. But when comparing it to its historical volatility, Allegiant Travel is 7.67 times less risky than Aeries Technology. It trades about 0.03 of its potential returns per unit of risk. Aeries Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Aeries Technology on October 11, 2024 and sell it today you would lose (7.12) from holding Aeries Technology or give up 54.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.65%
Values	Daily Returns

Allegiant Travel  vs.  Aeries Technology

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.

Aeries Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aeries Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Aeries Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegiant Travel and Aeries Technology

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

The idea behind Allegiant Travel and Aeries Technology 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.