Correlation Between DENSO and Allison Transmission
Can any of the company-specific risk be diversified away by investing in both DENSO 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 DENSO and Allison Transmission into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO and Allison Transmission Holdings, you can compare the effects of market volatilities on DENSO 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 DENSO with a short position of Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO and Allison Transmission.
Diversification Opportunities for DENSO and Allison Transmission
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DENSO and Allison is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DENSO and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission and DENSO 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 DENSO 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 DENSO i.e., DENSO and Allison Transmission go up and down completely randomly.
Pair Corralation between DENSO and Allison Transmission
Assuming the 90 days horizon DENSO is expected to generate 45.24 times more return on investment than Allison Transmission. However, DENSO is 45.24 times more volatile than Allison Transmission Holdings. It trades about 0.17 of its potential returns per unit of risk. Allison Transmission Holdings is currently generating about 0.13 per unit of risk. If you would invest 1,239 in DENSO on September 3, 2024 and sell it today you would earn a total of 251.00 from holding DENSO or generate 20.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.54% |
| Values | Daily Returns |
DENSO vs. Allison Transmission Holdings
Performance |
| Timeline |
| DENSO |
| Allison Transmission |
DENSO and Allison Transmission Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DENSO and Allison Transmission
The main advantage of trading using opposite DENSO and Allison Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO 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.The idea behind DENSO and Allison Transmission Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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