Correlation Between Adient PLC and Wabash National

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

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

Diversification Opportunities for Adient PLC and Wabash National

-0.08

Correlation Coefficient

Adient PLC  Wabash National

Good diversification

The 3 months correlation between Adient and Wabash is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Adient PLC i.e., Adient PLC and Wabash National go up and down completely randomly.

Pair Corralation between Adient PLC and Wabash National

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Wabash National. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.03 times less risky than Wabash National. The stock trades about -0.04 of its potential returns per unit of risk. The Wabash National is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,248  in Wabash National on September 5, 2024 and sell it today you would lose (283.00) from holding Wabash National or give up 12.59% of portfolio value over 90 days.

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

Adient PLC  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adient PLC and Wabash National

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

The idea behind Adient PLC and Wabash National 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 Valuation module to check real value of public entities based on technical and fundamental data.