Correlation Between AMCON Distributing and Allison

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

By analyzing existing cross correlation between AMCON Distributing and Allison Transmission 5875, you can compare the effects of market volatilities on AMCON Distributing 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 AMCON Distributing with a short position of Allison. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMCON Distributing and Allison.

Diversification Opportunities for AMCON Distributing and Allison

0.05

Correlation Coefficient

AMCON Distributing  Allison

Significant diversification

The 3 months correlation between AMCON and Allison is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and Allison Transmission 5875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission 5875 and AMCON Distributing 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 AMCON Distributing 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 5875 has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and Allison go up and down completely randomly.

Pair Corralation between AMCON Distributing and Allison

Considering the 90-day investment horizon AMCON Distributing is expected to under-perform the Allison. But the stock apears to be less risky and, when comparing its historical volatility, AMCON Distributing is 20.9 times less risky than Allison. The stock trades about 0.0 of its potential returns per unit of risk. The Allison Transmission 5875 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,511  in Allison Transmission 5875 on September 26, 2024 and sell it today you would earn a total of  377.00  from holding Allison Transmission 5875 or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.85%
Values	Daily Returns

AMCON Distributing  vs.  Allison Transmission 5875

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Allison Transmission 5875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allison Transmission 5875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Allison is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AMCON Distributing and Allison

The main advantage of trading using opposite AMCON Distributing and Allison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing 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 AMCON Distributing and Allison Transmission 5875 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.