Correlation Between Allison and Stagwell

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

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

Diversification Opportunities for Allison and Stagwell

-0.12

Correlation Coefficient

Allison  Stagwell

Good diversification

The 3 months correlation between Allison and Stagwell is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission 475 and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell and Allison 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 475 are associated (or correlated) with Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Allison i.e., Allison and Stagwell go up and down completely randomly.

Pair Corralation between Allison and Stagwell

Assuming the 90 days trading horizon Allison Transmission 475 is expected to generate 0.16 times more return on investment than Stagwell. However, Allison Transmission 475 is 6.44 times less risky than Stagwell. It trades about 0.01 of its potential returns per unit of risk. Stagwell is currently generating about 0.0 per unit of risk. If you would invest  9,712  in Allison Transmission 475 on September 21, 2024 and sell it today you would earn a total of  38.00  from holding Allison Transmission 475 or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.5%
Values	Daily Returns

Allison Transmission 475  vs.  Stagwell

Allison Transmission 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allison Transmission 475 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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Allison and Stagwell

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

The idea behind Allison Transmission 475 and Stagwell 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.