Correlation Between Allison Transmission and Miller Industries
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Miller Industries 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 Miller Industries 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 Miller Industries, you can compare the effects of market volatilities on Allison Transmission and Miller Industries 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 Miller Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Miller Industries.
Diversification Opportunities for Allison Transmission and Miller Industries
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Allison and Miller is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Miller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Industries 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 Miller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Industries has no effect on the direction of Allison Transmission i.e., Allison Transmission and Miller Industries go up and down completely randomly.
Pair Corralation between Allison Transmission and Miller Industries
Given the investment horizon of 90 days Allison Transmission is expected to generate 1.06 times less return on investment than Miller Industries. But when comparing it to its historical volatility, Allison Transmission Holdings is 1.14 times less risky than Miller Industries. It trades about 0.1 of its potential returns per unit of risk. Miller Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,692 in Miller Industries on November 19, 2024 and sell it today you would earn a total of 3,588 from holding Miller Industries or generate 133.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Miller Industries
Performance |
| Timeline |
| Allison Transmission |
| Miller Industries |
Allison Transmission and Miller Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Miller Industries
The main advantage of trading using opposite Allison Transmission and Miller Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Miller Industries 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 Miller Industries will offset losses from the drop in Miller Industries' long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Miller Industries vs. Dorman Products | Miller Industries vs. Standard Motor Products | Miller Industries vs. Motorcar Parts of | Miller Industries vs. Douglas Dynamics |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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