Correlation Between Allison Transmission and Trinity Industries
Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Trinity 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 Trinity 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 Trinity Industries, you can compare the effects of market volatilities on Allison Transmission and Trinity 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 Trinity Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Trinity Industries.
Diversification Opportunities for Allison Transmission and Trinity Industries
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Allison and Trinity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Trinity Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity 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 Trinity Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Industries has no effect on the direction of Allison Transmission i.e., Allison Transmission and Trinity Industries go up and down completely randomly.
Pair Corralation between Allison Transmission and Trinity Industries
Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 0.89 times more return on investment than Trinity Industries. However, Allison Transmission Holdings is 1.13 times less risky than Trinity Industries. It trades about 0.32 of its potential returns per unit of risk. Trinity Industries is currently generating about 0.09 per unit of risk. If you would invest 9,993 in Allison Transmission Holdings on August 30, 2024 and sell it today you would earn a total of 1,865 from holding Allison Transmission Holdings or generate 18.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allison Transmission Holdings vs. Trinity Industries
Performance |
| Timeline |
| Allison Transmission |
| Trinity Industries |
Allison Transmission and Trinity Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allison Transmission and Trinity Industries
The main advantage of trading using opposite Allison Transmission and Trinity Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Trinity 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 Trinity Industries will offset losses from the drop in Trinity Industries' long position.| Allison Transmission vs. Gentex | Allison Transmission vs. Adient PLC | Allison Transmission vs. Autoliv | Allison Transmission vs. Fox Factory Holding |
| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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