Correlation Between Aptiv PLC and Ford

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

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

Diversification Opportunities for Aptiv PLC and Ford

-0.26

Correlation Coefficient

Aptiv PLC  Ford

Very good diversification

The 3 months correlation between Aptiv and Ford is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Ford go up and down completely randomly.

Pair Corralation between Aptiv PLC and Ford

Given the investment horizon of 90 days Aptiv PLC is expected to generate 0.93 times more return on investment than Ford. However, Aptiv PLC is 1.08 times less risky than Ford. It trades about 0.29 of its potential returns per unit of risk. Ford Motor is currently generating about -0.32 per unit of risk. If you would invest  5,271  in Aptiv PLC on September 18, 2024 and sell it today you would earn a total of  515.00  from holding Aptiv PLC or generate 9.77% return on investment over 90 days.

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

Aptiv PLC  vs.  Ford Motor

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aptiv PLC and Ford

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

The idea behind Aptiv PLC and Ford Motor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.