Correlation Between Delek Logistics and Allegiant Travel

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

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

Diversification Opportunities for Delek Logistics and Allegiant Travel

0.34

Correlation Coefficient

Delek Logistics  Allegiant Travel

Weak diversification

The 3 months correlation between Delek and Allegiant is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and Delek Logistics 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 Delek Logistics Partners 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 Delek Logistics i.e., Delek Logistics and Allegiant Travel go up and down completely randomly.

Pair Corralation between Delek Logistics and Allegiant Travel

Considering the 90-day investment horizon Delek Logistics is expected to generate 4.23 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, Delek Logistics Partners is 2.13 times less risky than Allegiant Travel. It trades about 0.03 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,284  in Allegiant Travel on October 9, 2024 and sell it today you would earn a total of  2,628  from holding Allegiant Travel or generate 36.08% return on investment over 90 days.

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

Delek Logistics Partners  vs.  Allegiant Travel

Delek Logistics Partners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Logistics Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Delek Logistics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Delek Logistics and Allegiant Travel

The main advantage of trading using opposite Delek Logistics and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Logistics 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 Delek Logistics Partners 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.