Correlation Between Sun Country and Allegiant Travel

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

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

Diversification Opportunities for Sun Country and Allegiant Travel

0.72

Correlation Coefficient

Sun Country  Allegiant Travel

Poor diversification

The 3 months correlation between Sun and Allegiant is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sun Country Airlines and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and Sun Country 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 Sun Country Airlines 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 Sun Country i.e., Sun Country and Allegiant Travel go up and down completely randomly.

Pair Corralation between Sun Country and Allegiant Travel

Given the investment horizon of 90 days Sun Country Airlines is expected to generate 0.81 times more return on investment than Allegiant Travel. However, Sun Country Airlines is 1.23 times less risky than Allegiant Travel. It trades about -0.04 of its potential returns per unit of risk. Allegiant Travel is currently generating about -0.21 per unit of risk. If you would invest  1,475  in Sun Country Airlines on December 29, 2024 and sell it today you would lose (138.00) from holding Sun Country Airlines or give up 9.36% of portfolio value over 90 days.

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

Sun Country Airlines  vs.  Allegiant Travel

Sun Country Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Country Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Sun Country and Allegiant Travel

The main advantage of trading using opposite Sun Country and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Country 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 Sun Country Airlines 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.