Correlation Between Allison Transmission and Sharp

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

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

Diversification Opportunities for Allison Transmission and Sharp

-0.86

Correlation Coefficient

Allison Transmission  Sharp

Pay attention - limited upside

The 3 months correlation between Allison and Sharp is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Sharp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharp and Allison Transmission 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 Holdings are associated (or correlated) with Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharp has no effect on the direction of Allison Transmission i.e., Allison Transmission and Sharp go up and down completely randomly.

Pair Corralation between Allison Transmission and Sharp

Given the investment horizon of 90 days Allison Transmission Holdings is expected to under-perform the Sharp. In addition to that, Allison Transmission is 1.65 times more volatile than Sharp. It trades about -0.24 of its total potential returns per unit of risk. Sharp is currently generating about 0.21 per unit of volatility. If you would invest  513.00  in Sharp on February 2, 2024 and sell it today you would earn a total of  27.00  from holding Sharp or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Allison Transmission Holdings  vs.  Sharp

Allison Transmission

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allison Transmission Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Allison Transmission displayed solid returns over the last few months and may actually be approaching a breakup point.

Sharp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sharp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Allison Transmission and Sharp

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

The idea behind Allison Transmission Holdings and Sharp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.