Correlation Between Allison Transmission and Monro Muffler
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Monro Muffler 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 Monro Muffler 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 Monro Muffler Brake, you can compare the effects of market volatilities on Allison Transmission and Monro Muffler 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 Monro Muffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Monro Muffler.
Diversification Opportunities for Allison Transmission and Monro Muffler
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allison and Monro is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Monro Muffler Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monro Muffler Brake 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 Monro Muffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monro Muffler Brake has no effect on the direction of Allison Transmission i.e., Allison Transmission and Monro Muffler go up and down completely randomly.
Pair Corralation between Allison Transmission and Monro Muffler
Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 1.11 times more return on investment than Monro Muffler. However, Allison Transmission is 1.11 times more volatile than Monro Muffler Brake. It trades about 0.37 of its potential returns per unit of risk. Monro Muffler Brake is currently generating about -0.05 per unit of risk. If you would invest 9,964 in Allison Transmission Holdings on August 27, 2024 and sell it today you would earn a total of 2,001 from holding Allison Transmission Holdings or generate 20.08% 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. Monro Muffler Brake
Performance |
| Timeline |
| Allison Transmission |
| Monro Muffler Brake |
Allison Transmission and Monro Muffler Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Monro Muffler
The main advantage of trading using opposite Allison Transmission and Monro Muffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Monro Muffler 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 Monro Muffler will offset losses from the drop in Monro Muffler's long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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