Correlation Between Allegiant Travel and CAPITAL

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

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

Diversification Opportunities for Allegiant Travel and CAPITAL

0.22

Correlation Coefficient

Allegiant Travel  CAPITAL

Modest diversification

The 3 months correlation between Allegiant and CAPITAL is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL 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 CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FINL has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and CAPITAL go up and down completely randomly.

Pair Corralation between Allegiant Travel and CAPITAL

Given the investment horizon of 90 days Allegiant Travel is expected to under-perform the CAPITAL. In addition to that, Allegiant Travel is 21.02 times more volatile than CAPITAL ONE FINL. It trades about -0.22 of its total potential returns per unit of risk. CAPITAL ONE FINL is currently generating about -0.1 per unit of volatility. If you would invest  9,973  in CAPITAL ONE FINL on December 30, 2024 and sell it today you would lose (105.00) from holding CAPITAL ONE FINL or give up 1.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Allegiant Travel  vs.  CAPITAL ONE FINL

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.

CAPITAL ONE FINL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAPITAL ONE FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allegiant Travel and CAPITAL

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

The idea behind Allegiant Travel and CAPITAL ONE FINL 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.