Correlation Between Monro Muffler and Allison Transmission
Can any of the company-specific risk be diversified away by investing in both Monro Muffler 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 Monro Muffler and Allison Transmission into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monro Muffler Brake and Allison Transmission Holdings, you can compare the effects of market volatilities on Monro Muffler 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 Monro Muffler with a short position of Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monro Muffler and Allison Transmission.
Diversification Opportunities for Monro Muffler and Allison Transmission
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monro and Allison is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission and Monro Muffler 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 Monro Muffler Brake 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 Monro Muffler i.e., Monro Muffler and Allison Transmission go up and down completely randomly.
Pair Corralation between Monro Muffler and Allison Transmission
Given the investment horizon of 90 days Monro Muffler Brake is expected to under-perform the Allison Transmission. But the stock apears to be less risky and, when comparing its historical volatility, Monro Muffler Brake is 1.11 times less risky than Allison Transmission. The stock trades about -0.05 of its potential returns per unit of risk. The Allison Transmission Holdings is currently generating about 0.37 of returns per unit of risk over similar time horizon. 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monro Muffler Brake vs. Allison Transmission Holdings
Performance |
| Timeline |
| Monro Muffler Brake |
| Allison Transmission |
Monro Muffler and Allison Transmission Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monro Muffler and Allison Transmission
The main advantage of trading using opposite Monro Muffler and Allison Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monro Muffler 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.| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler vs. Douglas Dynamics |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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