Correlation Between Allegiant Travel and BZAM

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

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

Diversification Opportunities for Allegiant Travel and BZAM

-0.5

Correlation Coefficient

Allegiant Travel  BZAM

Very good diversification

The 3 months correlation between Allegiant and BZAM is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and BZAM go up and down completely randomly.

Pair Corralation between Allegiant Travel and BZAM

Given the investment horizon of 90 days Allegiant Travel is expected to generate 27.69 times less return on investment than BZAM. But when comparing it to its historical volatility, Allegiant Travel is 58.41 times less risky than BZAM. It trades about 0.26 of its potential returns per unit of risk. BZAM is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in BZAM on October 7, 2024 and sell it today you would lose (1.00) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Allegiant Travel  vs.  BZAM

Allegiant Travel

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 20 (%) 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.

BZAM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegiant Travel and BZAM

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

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