Correlation Between Brightsphere Investment and Allison

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

By analyzing existing cross correlation between Brightsphere Investment Group and Allison Transmission 475, you can compare the effects of market volatilities on Brightsphere Investment and Allison 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 Brightsphere Investment with a short position of Allison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightsphere Investment and Allison.

Diversification Opportunities for Brightsphere Investment and Allison

-0.12

Correlation Coefficient

Brightsphere Investment  Allison

Good diversification

The 3 months correlation between Brightsphere and Allison is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Allison Transmission 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission 475 and Brightsphere Investment 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 Brightsphere Investment Group are associated (or correlated) with Allison. 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 475 has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Allison go up and down completely randomly.

Pair Corralation between Brightsphere Investment and Allison

Given the investment horizon of 90 days Brightsphere Investment Group is expected to under-perform the Allison. In addition to that, Brightsphere Investment is 4.82 times more volatile than Allison Transmission 475. It trades about 0.0 of its total potential returns per unit of risk. Allison Transmission 475 is currently generating about 0.03 per unit of volatility. If you would invest  9,823  in Allison Transmission 475 on October 13, 2024 and sell it today you would earn a total of  52.00  from holding Allison Transmission 475 or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Brightsphere Investment Group  vs.  Allison Transmission 475

Brightsphere Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brightsphere Investment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Brightsphere Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Allison Transmission 475

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allison Transmission 475 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Allison is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brightsphere Investment and Allison

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

The idea behind Brightsphere Investment Group and Allison Transmission 475 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.