Correlation Between Allison Transmission and Cooper Stnd

Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Cooper Stnd 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 Allison Transmission and Cooper Stnd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allison Transmission Holdings and Cooper Stnd, you can compare the effects of market volatilities on Allison Transmission and Cooper Stnd 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 Allison Transmission with a short position of Cooper Stnd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Cooper Stnd.

Diversification Opportunities for Allison Transmission and Cooper Stnd

0.71

Correlation Coefficient

Allison Transmission  Cooper Stnd

Poor diversification

The 3 months correlation between Allison and Cooper is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Cooper Stnd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Stnd and Allison Transmission 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 Allison Transmission Holdings are associated (or correlated) with Cooper Stnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Stnd has no effect on the direction of Allison Transmission i.e., Allison Transmission and Cooper Stnd go up and down completely randomly.

Pair Corralation between Allison Transmission and Cooper Stnd

Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 0.37 times more return on investment than Cooper Stnd. However, Allison Transmission Holdings is 2.71 times less risky than Cooper Stnd. It trades about 0.12 of its potential returns per unit of risk. Cooper Stnd is currently generating about 0.02 per unit of risk. If you would invest  4,143  in Allison Transmission Holdings on October 9, 2024 and sell it today you would earn a total of  6,839  from holding Allison Transmission Holdings or generate 165.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Allison Transmission Holdings  vs.  Cooper Stnd

Allison Transmission

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allison Transmission Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Allison Transmission may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cooper Stnd

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cooper Stnd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cooper Stnd may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allison Transmission and Cooper Stnd

The main advantage of trading using opposite Allison Transmission and Cooper Stnd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission position performs unexpectedly, Cooper Stnd 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 Cooper Stnd will offset losses from the drop in Cooper Stnd's long position.

The idea behind Allison Transmission Holdings and Cooper Stnd 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.