Correlation Between Allison Transmission and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Commercial Vehicle 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 Commercial Vehicle 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 Commercial Vehicle Group, you can compare the effects of market volatilities on Allison Transmission and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Commercial Vehicle.
Diversification Opportunities for Allison Transmission and Commercial Vehicle
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Allison and Commercial is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of Allison Transmission i.e., Allison Transmission and Commercial Vehicle go up and down completely randomly.
Pair Corralation between Allison Transmission and Commercial Vehicle
Given the investment horizon of 90 days Allison Transmission Holdings is expected to under-perform the Commercial Vehicle. But the stock apears to be less risky and, when comparing its historical volatility, Allison Transmission Holdings is 1.4 times less risky than Commercial Vehicle. The stock trades about -0.19 of its potential returns per unit of risk. The Commercial Vehicle Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 223.00 in Commercial Vehicle Group on November 18, 2024 and sell it today you would lose (17.00) from holding Commercial Vehicle Group or give up 7.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Commercial Vehicle Group
Performance |
| Timeline |
| Allison Transmission |
| Commercial Vehicle |
Allison Transmission and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Commercial Vehicle
The main advantage of trading using opposite Allison Transmission and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Commercial Vehicle vs. Motorcar Parts of | Commercial Vehicle vs. Monro Muffler Brake | Commercial Vehicle vs. Stoneridge | Commercial Vehicle vs. Superior Industries International |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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