Correlation Between Adient PLC and Simpson Manufacturing

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

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

Diversification Opportunities for Adient PLC and Simpson Manufacturing

0.34

Correlation Coefficient

Adient PLC  Simpson Manufacturing

Weak diversification

The 3 months correlation between Adient and Simpson is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Simpson Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simpson Manufacturing 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 Simpson Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simpson Manufacturing has no effect on the direction of Adient PLC i.e., Adient PLC and Simpson Manufacturing go up and down completely randomly.

Pair Corralation between Adient PLC and Simpson Manufacturing

Given the investment horizon of 90 days Adient PLC is expected to generate 2.45 times less return on investment than Simpson Manufacturing. In addition to that, Adient PLC is 1.15 times more volatile than Simpson Manufacturing. It trades about 0.03 of its total potential returns per unit of risk. Simpson Manufacturing is currently generating about 0.08 per unit of volatility. If you would invest  17,955  in Simpson Manufacturing on September 5, 2024 and sell it today you would earn a total of  552.00  from holding Simpson Manufacturing or generate 3.07% return on investment over 90 days.

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

Adient PLC  vs.  Simpson Manufacturing

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Simpson Manufacturing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simpson Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Simpson Manufacturing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adient PLC and Simpson Manufacturing

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

The idea behind Adient PLC and Simpson Manufacturing 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.