Correlation Between Brookfield Business and Allison Transmission
Can any of the company-specific risk be diversified away by investing in both Brookfield Business and Allison Transmission 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 Brookfield Business and Allison Transmission into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Partners and Allison Transmission Holdings, you can compare the effects of market volatilities on Brookfield Business and Allison Transmission 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 Brookfield Business with a short position of Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Allison Transmission.
Diversification Opportunities for Brookfield Business and Allison Transmission
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and Allison is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission and Brookfield Business 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 Brookfield Business Partners are associated (or correlated) with Allison Transmission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allison Transmission has no effect on the direction of Brookfield Business i.e., Brookfield Business and Allison Transmission go up and down completely randomly.
Pair Corralation between Brookfield Business and Allison Transmission
Considering the 90-day investment horizon Brookfield Business is expected to generate 1.23 times less return on investment than Allison Transmission. In addition to that, Brookfield Business is 1.24 times more volatile than Allison Transmission Holdings. It trades about 0.15 of its total potential returns per unit of risk. Allison Transmission Holdings is currently generating about 0.23 per unit of volatility. If you would invest 7,386 in Allison Transmission Holdings on September 2, 2024 and sell it today you would earn a total of 4,464 from holding Allison Transmission Holdings or generate 60.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Business Partners vs. Allison Transmission Holdings
Performance |
| Timeline |
| Brookfield Business |
| Allison Transmission |
Brookfield Business and Allison Transmission Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Business and Allison Transmission
The main advantage of trading using opposite Brookfield Business and Allison Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business position performs unexpectedly, Allison Transmission 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 Allison Transmission will offset losses from the drop in Allison Transmission's long position.| Brookfield Business vs. Canadian Solar | Brookfield Business vs. Maxeon Solar Technologies | Brookfield Business vs. SolarEdge Technologies | Brookfield Business vs. Sunnova Energy International |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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