Correlation Between Crown and Allegiant Travel

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

By analyzing existing cross correlation between Crown Cork 7375 and Allegiant Travel, you can compare the effects of market volatilities on Crown 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 Crown with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown and Allegiant Travel.

Diversification Opportunities for Crown and Allegiant Travel

-0.43

Correlation Coefficient

Crown  Allegiant Travel

Very good diversification

The 3 months correlation between Crown and Allegiant is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Crown Cork 7375 and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and Crown 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 Crown Cork 7375 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 Crown i.e., Crown and Allegiant Travel go up and down completely randomly.

Pair Corralation between Crown and Allegiant Travel

Assuming the 90 days trading horizon Crown is expected to generate 58.71 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, Crown Cork 7375 is 7.77 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 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,347  in Allegiant Travel on September 23, 2024 and sell it today you would earn a total of  2,100  from holding Allegiant Travel or generate 33.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Crown Cork 7375  vs.  Allegiant Travel

Crown Cork 7375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Cork 7375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crown 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

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegiant Travel are ranked lower than 23 (%) 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 Crown and Allegiant Travel

The main advantage of trading using opposite Crown and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown 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 Crown Cork 7375 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.