Correlation Between Barrick Gold and Allison

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

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

Diversification Opportunities for Barrick Gold and Allison

0.33

Correlation Coefficient

Barrick Gold  Allison

Weak diversification

The 3 months correlation between Barrick and Allison is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp 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 Barrick Gold 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 Barrick Gold Corp 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 Barrick Gold i.e., Barrick Gold and Allison go up and down completely randomly.

Pair Corralation between Barrick Gold and Allison

Given the investment horizon of 90 days Barrick Gold is expected to generate 719.48 times less return on investment than Allison. But when comparing it to its historical volatility, Barrick Gold Corp is 35.06 times less risky than Allison. It trades about 0.0 of its potential returns per unit of risk. Allison Transmission 5875 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,483  in Allison Transmission 5875 on October 6, 2024 and sell it today you would lose (533.00) from holding Allison Transmission 5875 or give up 5.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.53%
Values	Daily Returns

Barrick Gold Corp  vs.  Allison Transmission 5875

Barrick Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Allison Transmission 5875 investors.

Pair Trading with Barrick Gold and Allison

The main advantage of trading using opposite Barrick Gold and Allison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrick Gold 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 Barrick Gold Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.