Correlation Between BBB Foods and Allegiant Travel

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

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

Diversification Opportunities for BBB Foods and Allegiant Travel

-0.34

Correlation Coefficient

BBB Foods  Allegiant Travel

Very good diversification

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

Pair Corralation between BBB Foods and Allegiant Travel

Given the investment horizon of 90 days BBB Foods is expected to under-perform the Allegiant Travel. In addition to that, BBB Foods is 1.55 times more volatile than Allegiant Travel. It trades about -0.17 of its total potential returns per unit of risk. Allegiant Travel is currently generating about 0.02 per unit of volatility. If you would invest  8,401  in Allegiant Travel on September 24, 2024 and sell it today you would earn a total of  46.00  from holding Allegiant Travel or generate 0.55% return on investment over 90 days.

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

BBB Foods  vs.  Allegiant Travel

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Allegiant Travel

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 22 (%) 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 BBB Foods and Allegiant Travel

The main advantage of trading using opposite BBB Foods and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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 BBB Foods 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.