Correlation Between Allison and ChampionX

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

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

Diversification Opportunities for Allison and ChampionX

0.39

Correlation Coefficient

Allison  ChampionX

Weak diversification

The 3 months correlation between Allison and ChampionX is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission 5875 and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX 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 5875 are associated (or correlated) with ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of Allison i.e., Allison and ChampionX go up and down completely randomly.

Pair Corralation between Allison and ChampionX

Assuming the 90 days trading horizon Allison Transmission 5875 is expected to generate 0.18 times more return on investment than ChampionX. However, Allison Transmission 5875 is 5.55 times less risky than ChampionX. It trades about -0.29 of its potential returns per unit of risk. ChampionX is currently generating about -0.48 per unit of risk. If you would invest  10,054  in Allison Transmission 5875 on September 26, 2024 and sell it today you would lose (166.00) from holding Allison Transmission 5875 or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Allison Transmission 5875  vs.  ChampionX

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.

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Allison and ChampionX

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

The idea behind Allison Transmission 5875 and ChampionX 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.