Correlation Between Allegiant Travel and LILLY

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

By analyzing existing cross correlation between Allegiant Travel and LILLY ELI 7125, you can compare the effects of market volatilities on Allegiant Travel and LILLY 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 LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and LILLY.

Diversification Opportunities for Allegiant Travel and LILLY

0.24

Correlation Coefficient

Allegiant Travel  LILLY

Modest diversification

The 3 months correlation between Allegiant and LILLY is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and LILLY ELI 7125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 7125 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 LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 7125 has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and LILLY go up and down completely randomly.

Pair Corralation between Allegiant Travel and LILLY

Given the investment horizon of 90 days Allegiant Travel is expected to generate 5.38 times more return on investment than LILLY. However, Allegiant Travel is 5.38 times more volatile than LILLY ELI 7125. It trades about 0.31 of its potential returns per unit of risk. LILLY ELI 7125 is currently generating about 0.02 per unit of risk. If you would invest  5,762  in Allegiant Travel on October 12, 2024 and sell it today you would earn a total of  4,332  from holding Allegiant Travel or generate 75.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

Allegiant Travel  vs.  LILLY ELI 7125

Allegiant Travel

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 24 (%) 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.

LILLY ELI 7125

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LILLY ELI 7125 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allegiant Travel and LILLY

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

The idea behind Allegiant Travel and LILLY ELI 7125 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 Global Correlations module to find global opportunities by holding instruments from different markets.