Correlation Between Allegiant Travel and NETGEAR

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

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

Diversification Opportunities for Allegiant Travel and NETGEAR

0.91

Correlation Coefficient

Allegiant Travel  NETGEAR

Almost no diversification

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

Pair Corralation between Allegiant Travel and NETGEAR

Given the investment horizon of 90 days Allegiant Travel is expected to generate 1.28 times less return on investment than NETGEAR. In addition to that, Allegiant Travel is 1.09 times more volatile than NETGEAR. It trades about 0.03 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.04 per unit of volatility. If you would invest  1,827  in NETGEAR on September 24, 2024 and sell it today you would earn a total of  973.00  from holding NETGEAR or generate 53.26% return on investment over 90 days.

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

Allegiant Travel  vs.  NETGEAR

Allegiant Travel

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 22 (%) 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.

NETGEAR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegiant Travel and NETGEAR

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

The idea behind Allegiant Travel and NETGEAR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.