Correlation Between Smurfit WestRock and Allison Transmission
Can any of the company-specific risk be diversified away by investing in both Smurfit WestRock 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 Smurfit WestRock and Allison Transmission into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smurfit WestRock plc and Allison Transmission Holdings, you can compare the effects of market volatilities on Smurfit WestRock 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 Smurfit WestRock with a short position of Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit WestRock and Allison Transmission.
Diversification Opportunities for Smurfit WestRock and Allison Transmission
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smurfit and Allison is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit WestRock plc and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission and Smurfit WestRock 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 Smurfit WestRock plc 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 Smurfit WestRock i.e., Smurfit WestRock and Allison Transmission go up and down completely randomly.
Pair Corralation between Smurfit WestRock and Allison Transmission
Allowing for the 90-day total investment horizon Smurfit WestRock plc is expected to generate 1.27 times more return on investment than Allison Transmission. However, Smurfit WestRock is 1.27 times more volatile than Allison Transmission Holdings. It trades about 0.36 of its potential returns per unit of risk. Allison Transmission Holdings is currently generating about 0.37 per unit of risk. If you would invest 4,502 in Smurfit WestRock plc on August 27, 2024 and sell it today you would earn a total of 1,162 from holding Smurfit WestRock plc or generate 25.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smurfit WestRock plc vs. Allison Transmission Holdings
Performance |
| Timeline |
| Smurfit WestRock plc |
| Allison Transmission |
Smurfit WestRock and Allison Transmission Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smurfit WestRock and Allison Transmission
The main advantage of trading using opposite Smurfit WestRock and Allison Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit WestRock 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.| Smurfit WestRock vs. QuickLogic | Smurfit WestRock vs. ScanSource | Smurfit WestRock vs. Tritent International Agriculture | Smurfit WestRock vs. Analog Devices |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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