Correlation Between Autoliv and Aptiv PLC

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

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

Diversification Opportunities for Autoliv and Aptiv PLC

0.39

Correlation Coefficient

Autoliv  Aptiv PLC

Weak diversification

The 3 months correlation between Autoliv and Aptiv is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and Autoliv 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 Autoliv are associated (or correlated) with Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Autoliv i.e., Autoliv and Aptiv PLC go up and down completely randomly.

Pair Corralation between Autoliv and Aptiv PLC

Considering the 90-day investment horizon Autoliv is expected to under-perform the Aptiv PLC. In addition to that, Autoliv is 1.21 times more volatile than Aptiv PLC. It trades about 0.0 of its total potential returns per unit of risk. Aptiv PLC is currently generating about 0.04 per unit of volatility. If you would invest  6,011  in Aptiv PLC on December 28, 2024 and sell it today you would earn a total of  214.00  from holding Aptiv PLC or generate 3.56% return on investment over 90 days.

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

Autoliv  vs.  Aptiv PLC

Autoliv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aptiv PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Autoliv and Aptiv PLC

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

The idea behind Autoliv and Aptiv PLC 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 Stocks Directory module to find actively traded stocks across global markets.