Correlation Between Allegiant Travel and IXE Select

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

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

Diversification Opportunities for Allegiant Travel and IXE Select

-0.32

Correlation Coefficient

Allegiant Travel  IXE Select

Very good diversification

The 3 months correlation between Allegiant and IXE is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and IXE Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXE Select Sector 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 IXE Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXE Select Sector has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and IXE Select go up and down completely randomly.

Pair Corralation between Allegiant Travel and IXE Select

Given the investment horizon of 90 days Allegiant Travel is expected to generate 2.86 times more return on investment than IXE Select. However, Allegiant Travel is 2.86 times more volatile than IXE Select Sector. It trades about 0.32 of its potential returns per unit of risk. IXE Select Sector is currently generating about -0.07 per unit of risk. If you would invest  5,507  in Allegiant Travel on October 9, 2024 and sell it today you would earn a total of  4,305  from holding Allegiant Travel or generate 78.17% return on investment over 90 days.

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

Allegiant Travel  vs.  IXE Select Sector

Pair Trading with Allegiant Travel and IXE Select

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

The idea behind Allegiant Travel and IXE Select Sector 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.