Correlation Between Allegiant Travel and Capitalworks Emerging

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

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

Diversification Opportunities for Allegiant Travel and Capitalworks Emerging

0.11

Correlation Coefficient

Allegiant Travel  Capitalworks Emerging

Average diversification

The 3 months correlation between Allegiant and Capitalworks is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Capitalworks Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitalworks Emerging 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 Capitalworks Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitalworks Emerging has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Capitalworks Emerging go up and down completely randomly.

Pair Corralation between Allegiant Travel and Capitalworks Emerging

Given the investment horizon of 90 days Allegiant Travel is expected to generate 2.71 times more return on investment than Capitalworks Emerging. However, Allegiant Travel is 2.71 times more volatile than Capitalworks Emerging Markets. It trades about 0.03 of its potential returns per unit of risk. Capitalworks Emerging Markets is currently generating about 0.02 per unit of risk. If you would invest  8,266  in Allegiant Travel on October 11, 2024 and sell it today you would earn a total of  1,664  from holding Allegiant Travel or generate 20.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	25.45%
Values	Daily Returns

Allegiant Travel  vs.  Capitalworks Emerging Markets

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.

Capitalworks Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capitalworks Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capitalworks Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Allegiant Travel and Capitalworks Emerging

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

The idea behind Allegiant Travel and Capitalworks Emerging Markets 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.