Correlation Between Allegiant Travel and Aegean Airlines

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

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

Diversification Opportunities for Allegiant Travel and Aegean Airlines

0.84

Correlation Coefficient

Allegiant Travel  Aegean Airlines

Very poor diversification

The 3 months correlation between Allegiant and Aegean is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA and Allegiant Travel 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 Allegiant Travel are associated (or correlated) with Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Aegean Airlines go up and down completely randomly.

Pair Corralation between Allegiant Travel and Aegean Airlines

Given the investment horizon of 90 days Allegiant Travel is expected to under-perform the Aegean Airlines. In addition to that, Allegiant Travel is 1.45 times more volatile than Aegean Airlines SA. It trades about -0.47 of its total potential returns per unit of risk. Aegean Airlines SA is currently generating about -0.28 per unit of volatility. If you would invest  1,428  in Aegean Airlines SA on January 29, 2024 and sell it today you would lose (111.00) from holding Aegean Airlines SA or give up 7.77% of portfolio value over 90 days.

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

Allegiant Travel  vs.  Aegean Airlines SA

Allegiant Travel

Risk-Adjusted Performance

0 of 100

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 May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Allegiant Travel and Aegean Airlines

The main advantage of trading using opposite Allegiant Travel and Aegean Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegiant Travel position performs unexpectedly, Aegean Airlines 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 Aegean Airlines will offset losses from the drop in Aegean Airlines' long position.

The idea behind Allegiant Travel and Aegean Airlines SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.