Correlation Between Allison Transmission and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Douglas Dynamics 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 Douglas Dynamics 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 Douglas Dynamics, you can compare the effects of market volatilities on Allison Transmission and Douglas Dynamics 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 Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Douglas Dynamics.
Diversification Opportunities for Allison Transmission and Douglas Dynamics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Allison and Douglas is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics 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 Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Allison Transmission i.e., Allison Transmission and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Allison Transmission and Douglas Dynamics
Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 0.76 times more return on investment than Douglas Dynamics. However, Allison Transmission Holdings is 1.32 times less risky than Douglas Dynamics. It trades about 0.15 of its potential returns per unit of risk. Douglas Dynamics is currently generating about 0.01 per unit of risk. If you would invest 4,608 in Allison Transmission Holdings on August 27, 2024 and sell it today you would earn a total of 7,357 from holding Allison Transmission Holdings or generate 159.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Douglas Dynamics
Performance |
| Timeline |
| Allison Transmission |
| Douglas Dynamics |
Allison Transmission and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Douglas Dynamics
The main advantage of trading using opposite Allison Transmission and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |