Correlation Between Aptiv PLC and Magna International

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

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

Diversification Opportunities for Aptiv PLC and Magna International

-0.59

Correlation Coefficient

Aptiv PLC  Magna International

Excellent diversification

The 3 months correlation between Aptiv and Magna is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Magna International go up and down completely randomly.

Pair Corralation between Aptiv PLC and Magna International

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the Magna International. In addition to that, Aptiv PLC is 1.3 times more volatile than Magna International. It trades about -0.12 of its total potential returns per unit of risk. Magna International is currently generating about 0.07 per unit of volatility. If you would invest  4,158  in Magna International on August 30, 2024 and sell it today you would earn a total of  337.00  from holding Magna International or generate 8.1% return on investment over 90 days.

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

Aptiv PLC  vs.  Magna International

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Magna International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aptiv PLC and Magna International

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

The idea behind Aptiv PLC and Magna International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.