Correlation Between Allegiant Travel and Delta Air

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

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

Diversification Opportunities for Allegiant Travel and Delta Air

0.91

Correlation Coefficient

Allegiant Travel  Delta Air

Almost no diversification

The 3 months correlation between Allegiant and Delta is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines 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 Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Delta Air go up and down completely randomly.

Pair Corralation between Allegiant Travel and Delta Air

Given the investment horizon of 90 days Allegiant Travel is expected to under-perform the Delta Air. In addition to that, Allegiant Travel is 1.26 times more volatile than Delta Air Lines. It trades about -0.21 of its total potential returns per unit of risk. Delta Air Lines is currently generating about -0.14 per unit of volatility. If you would invest  6,057  in Delta Air Lines on December 29, 2024 and sell it today you would lose (1,442) from holding Delta Air Lines or give up 23.81% of portfolio value over 90 days.

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

Allegiant Travel  vs.  Delta Air Lines

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.

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Allegiant Travel and Delta Air

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

The idea behind Allegiant Travel and Delta Air Lines 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.