Correlation Between Aptiv PLC and Knorr-Bremse Aktiengesellscha

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

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

Diversification Opportunities for Aptiv PLC and Knorr-Bremse Aktiengesellscha

0.55

Correlation Coefficient

Aptiv PLC  Knorr-Bremse Aktiengesellscha

Very weak diversification

The 3 months correlation between Aptiv and Knorr-Bremse is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Knorr Bremse Aktiengesellschaf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knorr-Bremse Aktiengesellscha has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Knorr-Bremse Aktiengesellscha go up and down completely randomly.

Pair Corralation between Aptiv PLC and Knorr-Bremse Aktiengesellscha

Given the investment horizon of 90 days Aptiv PLC is expected to generate 5.42 times less return on investment than Knorr-Bremse Aktiengesellscha. But when comparing it to its historical volatility, Aptiv PLC is 1.64 times less risky than Knorr-Bremse Aktiengesellscha. It trades about 0.06 of its potential returns per unit of risk. Knorr Bremse Aktiengesellschaft is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,805  in Knorr Bremse Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  587.00  from holding Knorr Bremse Aktiengesellschaft or generate 32.52% return on investment over 90 days.

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

Aptiv PLC  vs.  Knorr Bremse Aktiengesellschaf

Aptiv PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 4 (%) 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.

Knorr-Bremse Aktiengesellscha

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knorr Bremse Aktiengesellschaft are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Knorr-Bremse Aktiengesellscha showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and Knorr-Bremse Aktiengesellscha

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

The idea behind Aptiv PLC and Knorr Bremse Aktiengesellschaft 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.