Correlation Between FREEPORT and Allegiant Travel

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

By analyzing existing cross correlation between FREEPORT MCMORAN INC 525 and Allegiant Travel, you can compare the effects of market volatilities on FREEPORT 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 FREEPORT with a short position of Allegiant Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and Allegiant Travel.

Diversification Opportunities for FREEPORT and Allegiant Travel

-0.46

Correlation Coefficient

FREEPORT  Allegiant Travel

Very good diversification

The 3 months correlation between FREEPORT and Allegiant is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 525 and Allegiant Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegiant Travel and FREEPORT 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 FREEPORT MCMORAN INC 525 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 FREEPORT i.e., FREEPORT and Allegiant Travel go up and down completely randomly.

Pair Corralation between FREEPORT and Allegiant Travel

Assuming the 90 days trading horizon FREEPORT is expected to generate 10.8 times less return on investment than Allegiant Travel. But when comparing it to its historical volatility, FREEPORT MCMORAN INC 525 is 5.05 times less risky than Allegiant Travel. It trades about 0.01 of its potential returns per unit of risk. Allegiant Travel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,557  in Allegiant Travel on September 19, 2024 and sell it today you would earn a total of  1,528  from holding Allegiant Travel or generate 23.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

FREEPORT MCMORAN INC 525  vs.  Allegiant Travel

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT 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

24 of 100

Strong

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 FREEPORT and Allegiant Travel

The main advantage of trading using opposite FREEPORT and Allegiant Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREEPORT 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 FREEPORT MCMORAN INC 525 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.