Correlation Between Allegiant Travel and Air France

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

By analyzing existing cross correlation between Allegiant Travel and Air France KLM, you can compare the effects of market volatilities on Allegiant Travel and Air France 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 Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegiant Travel and Air France.

Diversification Opportunities for Allegiant Travel and Air France

0.7

Correlation Coefficient

Allegiant Travel  Air France

Poor diversification

The 3 months correlation between Allegiant and Air is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Allegiant Travel and Air France KLM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Allegiant Travel i.e., Allegiant Travel and Air France go up and down completely randomly.

Pair Corralation between Allegiant Travel and Air France

Given the investment horizon of 90 days Allegiant Travel is expected to generate 0.79 times more return on investment than Air France. However, Allegiant Travel is 1.27 times less risky than Air France. It trades about -0.05 of its potential returns per unit of risk. Air France KLM is currently generating about -0.04 per unit of risk. If you would invest  13,870  in Allegiant Travel on February 3, 2024 and sell it today you would lose (8,433) from holding Allegiant Travel or give up 60.8% of portfolio value over 90 days.

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

Allegiant Travel  vs.  Air France KLM

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

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Allegiant Travel and Air France

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

The idea behind Allegiant Travel and Air France KLM 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.