Correlation Between Delta Air and Allegiant Travel

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

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

Diversification Opportunities for Delta Air and Allegiant Travel

0.91

Correlation Coefficient

Delta Air  Allegiant Travel

Almost no diversification

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

Pair Corralation between Delta Air and Allegiant Travel

Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.79 times more return on investment than Allegiant Travel. However, Delta Air Lines is 1.26 times less risky than Allegiant Travel. It trades about -0.14 of its potential returns per unit of risk. Allegiant Travel is currently generating about -0.21 per unit of risk. If you would invest  6,057  in Delta Air Lines on December 29, 2024 and sell it today you would lose (1,442) from holding Delta Air Lines or give up 23.81% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Allegiant Travel

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Delta Air and Allegiant Travel

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

The idea behind Delta Air Lines and Allegiant Travel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.