Correlation Between Allegiant Travel and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Allegiant Travel and Centessa Pharmaceuticals

0.65

Correlation Coefficient

Allegiant Travel  Centessa Pharmaceuticals

Poor diversification

The 3 months correlation between Allegiant and Centessa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Allegiant Travel and Centessa Pharmaceuticals

Given the investment horizon of 90 days Allegiant Travel is expected to generate 4.5 times less return on investment than Centessa Pharmaceuticals. But when comparing it to its historical volatility, Allegiant Travel is 1.4 times less risky than Centessa Pharmaceuticals. It trades about 0.03 of its potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Centessa Pharmaceuticals PLC on September 20, 2024 and sell it today you would earn a total of  1,341  from holding Centessa Pharmaceuticals PLC or generate 432.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Allegiant Travel  vs.  Centessa Pharmaceuticals PLC

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.

Centessa Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allegiant Travel and Centessa Pharmaceuticals

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

The idea behind Allegiant Travel and Centessa Pharmaceuticals PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.