Correlation Between Commercial Vehicle and Allison Transmission
Can any of the company-specific risk be diversified away by investing in both Commercial Vehicle 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 Commercial Vehicle and Allison Transmission into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Vehicle Group and Allison Transmission Holdings, you can compare the effects of market volatilities on Commercial Vehicle 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 Commercial Vehicle with a short position of Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Vehicle and Allison Transmission.
Diversification Opportunities for Commercial Vehicle and Allison Transmission
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commercial and Allison is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission and Commercial Vehicle 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 Commercial Vehicle Group 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 Commercial Vehicle i.e., Commercial Vehicle and Allison Transmission go up and down completely randomly.
Pair Corralation between Commercial Vehicle and Allison Transmission
Given the investment horizon of 90 days Commercial Vehicle Group is expected to under-perform the Allison Transmission. In addition to that, Commercial Vehicle is 2.73 times more volatile than Allison Transmission Holdings. It trades about -0.16 of its total potential returns per unit of risk. Allison Transmission Holdings is currently generating about 0.37 per unit of volatility. 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Vehicle Group vs. Allison Transmission Holdings
Performance |
| Timeline |
| Commercial Vehicle |
| Allison Transmission |
Commercial Vehicle and Allison Transmission Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Vehicle and Allison Transmission
The main advantage of trading using opposite Commercial Vehicle and Allison Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Vehicle 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.| Commercial Vehicle vs. Motorcar Parts of | Commercial Vehicle vs. Monro Muffler Brake | Commercial Vehicle vs. Stoneridge | Commercial Vehicle vs. Superior Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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