Correlation Between Allison Transmission and Greenbrier Companies
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Greenbrier Companies 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 Greenbrier Companies 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 Greenbrier Companies, you can compare the effects of market volatilities on Allison Transmission and Greenbrier Companies 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 Greenbrier Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Greenbrier Companies.
Diversification Opportunities for Allison Transmission and Greenbrier Companies
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Allison and Greenbrier is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies 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 Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of Allison Transmission i.e., Allison Transmission and Greenbrier Companies go up and down completely randomly.
Pair Corralation between Allison Transmission and Greenbrier Companies
Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 1.26 times more return on investment than Greenbrier Companies. However, Allison Transmission is 1.26 times more volatile than Greenbrier Companies. It trades about 0.38 of its potential returns per unit of risk. Greenbrier Companies is currently generating about 0.23 per unit of risk. If you would invest 9,828 in Allison Transmission Holdings on August 26, 2024 and sell it today you would earn a total of 2,137 from holding Allison Transmission Holdings or generate 21.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Greenbrier Companies
Performance |
| Timeline |
| Allison Transmission |
| Greenbrier Companies |
Allison Transmission and Greenbrier Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Greenbrier Companies
The main advantage of trading using opposite Allison Transmission and Greenbrier Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Greenbrier Companies 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 Greenbrier Companies will offset losses from the drop in Greenbrier Companies' long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Greenbrier Companies vs. LB Foster | Greenbrier Companies vs. Freightcar America | Greenbrier Companies vs. Westinghouse Air Brake | Greenbrier Companies vs. CSX Corporation |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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