Correlation Between Allison Transmission and Visteon Corp

Can any of the company-specific risk be diversified away by investing in both Allison Transmission and Visteon Corp 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 Visteon Corp 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 Visteon Corp, you can compare the effects of market volatilities on Allison Transmission and Visteon Corp 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 Visteon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allison Transmission and Visteon Corp.

Diversification Opportunities for Allison Transmission and Visteon Corp

-0.66

Correlation Coefficient

Allison Transmission  Visteon Corp

Excellent diversification

The 3 months correlation between Allison and Visteon is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Allison Transmission i.e., Allison Transmission and Visteon Corp go up and down completely randomly.

Pair Corralation between Allison Transmission and Visteon Corp

Given the investment horizon of 90 days Allison Transmission Holdings is expected to under-perform the Visteon Corp. In addition to that, Allison Transmission is 1.25 times more volatile than Visteon Corp. It trades about -0.2 of its total potential returns per unit of risk. Visteon Corp is currently generating about 0.11 per unit of volatility. If you would invest  11,227  in Visteon Corp on February 8, 2024 and sell it today you would earn a total of  385.00  from holding Visteon Corp or generate 3.43% return on investment over 90 days.

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

Allison Transmission Holdings  vs.  Visteon Corp

Allison Transmission

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allison Transmission Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Allison Transmission displayed solid returns over the last few months and may actually be approaching a breakup point.

Visteon Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visteon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Visteon Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allison Transmission and Visteon Corp

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

The idea behind Allison Transmission Holdings and Visteon Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.