Correlation Between Allegiant Travel and Air Transport

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

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

Diversification Opportunities for Allegiant Travel and Air Transport

-0.57

Correlation Coefficient

Allegiant Travel  Air Transport

Excellent diversification

The 3 months correlation between Allegiant and Air is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Air Transport go up and down completely randomly.

Pair Corralation between Allegiant Travel and Air Transport

Given the investment horizon of 90 days Allegiant Travel is expected to under-perform the Air Transport. In addition to that, Allegiant Travel is 27.92 times more volatile than Air Transport Services. It trades about -0.21 of its total potential returns per unit of risk. Air Transport Services is currently generating about 0.26 per unit of volatility. If you would invest  2,197  in Air Transport Services on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Air Transport Services or generate 2.14% return on investment over 90 days.

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

Allegiant Travel  vs.  Air Transport Services

Allegiant Travel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allegiant Travel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allegiant Travel and Air Transport

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

The idea behind Allegiant Travel and Air Transport Services 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..