Correlation Between Allison Transmission and NSK
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and NSK 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 NSK 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 NSK Ltd ADR, you can compare the effects of market volatilities on Allison Transmission and NSK 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 NSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and NSK.
Diversification Opportunities for Allison Transmission and NSK
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Allison and NSK is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and NSK Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSK Ltd ADR 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 NSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSK Ltd ADR has no effect on the direction of Allison Transmission i.e., Allison Transmission and NSK go up and down completely randomly.
Pair Corralation between Allison Transmission and NSK
Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 0.74 times more return on investment than NSK. However, Allison Transmission Holdings is 1.35 times less risky than NSK. It trades about 0.26 of its potential returns per unit of risk. NSK Ltd ADR is currently generating about -0.14 per unit of risk. If you would invest 9,586 in Allison Transmission Holdings on August 30, 2024 and sell it today you would earn a total of 2,272 from holding Allison Transmission Holdings or generate 23.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
Allison Transmission Holdings vs. NSK Ltd ADR
Performance |
| Timeline |
| Allison Transmission |
| NSK Ltd ADR |
Allison Transmission and NSK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and NSK
The main advantage of trading using opposite Allison Transmission and NSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, NSK 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 NSK will offset losses from the drop in NSK'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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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