Correlation Between Adient PLC and RH

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

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

Diversification Opportunities for Adient PLC and RH

-0.75

Correlation Coefficient

Adient PLC  RH

Pay attention - limited upside

The 3 months correlation between Adient and RH is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and Adient PLC 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 Adient PLC are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of Adient PLC i.e., Adient PLC and RH go up and down completely randomly.

Pair Corralation between Adient PLC and RH

Given the investment horizon of 90 days Adient PLC is expected to under-perform the RH. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.55 times less risky than RH. The stock trades about -0.07 of its potential returns per unit of risk. The RH is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  29,917  in RH on October 11, 2024 and sell it today you would earn a total of  10,910  from holding RH or generate 36.47% return on investment over 90 days.

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

Adient PLC  vs.  RH

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

RH

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adient PLC and RH

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

The idea behind Adient PLC and RH 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.