Correlation Between Allison Transmission and Quantumscape Corp

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

Diversification Opportunities for Allison Transmission and Quantumscape Corp

0.55

Correlation Coefficient

Allison Transmission  Quantumscape Corp

Very weak diversification

The 3 months correlation between Allison and Quantumscape is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Quantumscape Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantumscape Corp 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 Quantumscape Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantumscape Corp has no effect on the direction of Allison Transmission i.e., Allison Transmission and Quantumscape Corp go up and down completely randomly.

Pair Corralation between Allison Transmission and Quantumscape Corp

Given the investment horizon of 90 days Allison Transmission Holdings is expected to generate 0.6 times more return on investment than Quantumscape Corp. However, Allison Transmission Holdings is 1.66 times less risky than Quantumscape Corp. It trades about -0.05 of its potential returns per unit of risk. Quantumscape Corp is currently generating about -0.1 per unit of risk. If you would invest  10,845  in Allison Transmission Holdings on December 27, 2024 and sell it today you would lose (941.00) from holding Allison Transmission Holdings or give up 8.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Allison Transmission Holdings  vs.  Quantumscape Corp

Allison Transmission

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allison Transmission Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Quantumscape Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Allison Transmission and Quantumscape Corp

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

The idea behind Allison Transmission Holdings and Quantumscape Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.