Correlation Between Allison Transmission and Autoliv
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Autoliv 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 Allison Transmission and Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allison Transmission Holdings and Autoliv, you can compare the effects of market volatilities on Allison Transmission and Autoliv 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 Allison Transmission with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Autoliv.
Diversification Opportunities for Allison Transmission and Autoliv
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allison and Autoliv is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Allison Transmission 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 Allison Transmission Holdings are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Allison Transmission i.e., Allison Transmission and Autoliv go up and down completely randomly.
Pair Corralation between Allison Transmission and Autoliv
Given the investment horizon of 90 days Allison Transmission Holdings is expected to under-perform the Autoliv. In addition to that, Allison Transmission is 1.68 times more volatile than Autoliv. It trades about -0.19 of its total potential returns per unit of risk. Autoliv is currently generating about 0.01 per unit of volatility. If you would invest 9,812 in Autoliv on November 18, 2024 and sell it today you would earn a total of 3.00 from holding Autoliv or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Autoliv
Performance |
| Timeline |
| Allison Transmission |
| Autoliv |
Allison Transmission and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Autoliv
The main advantage of trading using opposite Allison Transmission and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Autoliv 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 Autoliv will offset losses from the drop in Autoliv's long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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