Correlation Between Aptiv PLC and ECARX Holdings

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

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

Diversification Opportunities for Aptiv PLC and ECARX Holdings

0.47

Correlation Coefficient

Aptiv PLC  ECARX Holdings

Very weak diversification

The 3 months correlation between Aptiv and ECARX is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and ECARX Holdings Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Warrants and Aptiv 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 Aptiv PLC are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Warrants has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and ECARX Holdings go up and down completely randomly.

Pair Corralation between Aptiv PLC and ECARX Holdings

Given the investment horizon of 90 days Aptiv PLC is expected to generate 33.34 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Aptiv PLC is 9.81 times less risky than ECARX Holdings. It trades about 0.04 of its potential returns per unit of risk. ECARX Holdings Warrants is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5.00  in ECARX Holdings Warrants on December 28, 2024 and sell it today you would earn a total of  4.55  from holding ECARX Holdings Warrants or generate 91.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.33%
Values	Daily Returns

Aptiv PLC  vs.  ECARX Holdings Warrants

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.

ECARX Holdings Warrants

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Warrants are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and ECARX Holdings

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

The idea behind Aptiv PLC and ECARX Holdings Warrants 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.