Correlation Between Allison Transmission and Compagnie Generale

Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Compagnie Generale 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 Compagnie Generale 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 Compagnie Generale des, you can compare the effects of market volatilities on Allison Transmission and Compagnie Generale 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 Compagnie Generale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Compagnie Generale.

Diversification Opportunities for Allison Transmission and Compagnie Generale

-0.83

Correlation Coefficient

Allison Transmission  Compagnie Generale

Pay attention - limited upside

The 3 months correlation between Allison and Compagnie is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Compagnie Generale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Generale des 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 Compagnie Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Generale des has no effect on the direction of Allison Transmission i.e., Allison Transmission and Compagnie Generale go up and down completely randomly.

Pair Corralation between Allison Transmission and Compagnie Generale

Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 1.21 times more return on investment than Compagnie Generale. However, Allison Transmission is 1.21 times more volatile than Compagnie Generale des. It trades about 0.26 of its potential returns per unit of risk. Compagnie Generale des is currently generating about -0.18 per unit of risk. If you would invest  8,794  in Allison Transmission Holdings on September 14, 2024 and sell it today you would earn a total of  2,893  from holding Allison Transmission Holdings or generate 32.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Allison Transmission Holdings  vs.  Compagnie Generale des

Allison Transmission

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allison Transmission Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Allison Transmission displayed solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Generale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Generale des has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Allison Transmission and Compagnie Generale

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

The idea behind Allison Transmission Holdings and Compagnie Generale des 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.