Correlation Between Allegiant Travel and Tokyo Electron

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

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

Diversification Opportunities for Allegiant Travel and Tokyo Electron

0.66

Correlation Coefficient

Allegiant Travel  Tokyo Electron

Poor diversification

The 3 months correlation between Allegiant and Tokyo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Tokyo Electron go up and down completely randomly.

Pair Corralation between Allegiant Travel and Tokyo Electron

Given the investment horizon of 90 days Allegiant Travel is expected to under-perform the Tokyo Electron. In addition to that, Allegiant Travel is 1.09 times more volatile than Tokyo Electron. It trades about -0.19 of its total potential returns per unit of risk. Tokyo Electron is currently generating about 0.0 per unit of volatility. If you would invest  15,486  in Tokyo Electron on December 22, 2024 and sell it today you would lose (472.00) from holding Tokyo Electron or give up 3.05% of portfolio value over 90 days.

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

Allegiant Travel  vs.  Tokyo Electron

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.

Tokyo Electron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tokyo Electron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tokyo Electron is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allegiant Travel and Tokyo Electron

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

The idea behind Allegiant Travel and Tokyo Electron 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.